-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K0y78ZptCeIXIXyuOqkjkAznSiHJIEqPYA7n1SO6D8N/SHsNQoBeO1UDp4uTP3VG WcAgwhvztbzDWxWpoa3JNg== 0001035704-98-000227.txt : 19980401 0001035704-98-000227.hdr.sgml : 19980401 ACCESSION NUMBER: 0001035704-98-000227 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 26 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980331 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATLAS AIR INC CENTRAL INDEX KEY: 0000941552 STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, NONSCHEDULED [4522] IRS NUMBER: 841207329 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-13569 FILM NUMBER: 98580405 BUSINESS ADDRESS: STREET 1: 538 COMMONS DR CITY: GOLDEN STATE: CO ZIP: 80401 BUSINESS PHONE: 3035265050 10-K 1 FORM 10-K FOR YEAR ENDED DECEMBER 31, 1997 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------- FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] -------------------------- COMMISSION FILE NUMBER 0-25732 ATLAS AIR, INC. (Exact name of registrant as specified in its charter) DELAWARE 84-1207329 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 538 COMMONS DRIVE, GOLDEN, COLORADO 80401 (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 526-5050 Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, PAR VALUE $.01 PER SHARE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (sec. 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] As of March 16, 1998, there were 22,511,659 shares of common stock outstanding. The aggregate market value of such shares held by non-affiliates of the registrant was approximately $749,216,151. DOCUMENTS INCORPORATED BY REFERENCE
DESCRIPTION OF DOCUMENT PART OF THE FORM 10-K ----------------------- --------------------- Portions of the Definitive Proxy Statement to be used in connection with the registrant's 1998 Annual Meeting of Stockholders............................................ Part III (Item 10 through Item 13)
================================================================================ 2 PART I ITEM 1. BUSINESS GENERAL Atlas Air, Inc. ("Atlas" or the "Company") is the world's largest air cargo outsourcer, with an all Boeing fleet of 747 freighter aircraft. The Company provides reliable airport-to-airport cargo transportation services throughout the world to major international air carriers generally under three- to five-year fixed-rate contracts which typically require that the Company supply aircraft, crew, maintenance and insurance (the "ACMI Contracts"). The Company's customers currently include China Airlines Ltd. ("China Airlines"), KLM Royal Dutch Airlines ("KLM"), Lufthansa Cargo AG ("Lufthansa"), British Airways World Cargo ("British Airways"), Scandinavian Airlines System ("SAS"), The International Airline of the United Arab Emirates ("Emirates"), Thai Airways International Public Company Limited ("Thai Airways"), Fast Air Carrier, S.A. ("Fast Air") and Lineas Aereas Suramericanas, S.A. ("LAS"). The Company is able to provide efficient, cost effective service to its customers primarily as a result of its productive work force, the outsourcing of a significant part of its regular maintenance work on a fixed-cost basis and the advantageous cost economies realized in the operation of its fleet, comprised solely of Boeing 747 aircraft which are configured for service in long-haul cargo operations. The Company's fleet currently consists of 17 Boeing 747-200 freighter aircraft in service and two 747-200 passenger aircraft undergoing conversion to freighter configuration. The 747-200 passenger aircraft undergoing conversion to freighter configuration are expected to be placed in service in the second quarter and early in the third quarter of 1998. On June 9, 1997, the Company entered into an agreement with The Boeing Company ("Boeing") to purchase 10 new 747-400 freighter aircraft to be powered by engines acquired from General Electric Company ("GE"), with options to purchase up to 10 additional 747-400 aircraft (the "Boeing Purchase Agreement"). The 747-400 aircraft has significantly longer range, greater payload capability, lower maintenance costs and increased fuel efficiency compared to the Boeing 747-200 freighter aircraft. The Company expects to place the 747-400 aircraft in service with both existing and prospective customers, who the Company believes should be willing to pay higher ACMI Contract rates to achieve operating benefits derived from the unique performance capabilities of the 747-400 aircraft. The Company attributes its leading market position and continued opportunities for growth to the following competitive strengths: Long-Term Customer Contracts Which Provide Revenue Stability. The Company's ACMI Contracts with its customers, which accounted for 96% of the Company's total operating revenues in 1997, generally provide for its customers to guarantee monthly minimum aircraft utilization levels at fixed hourly rates and are typically in force for periods of three to five years, subject in certain limited cases to early termination provisions. These ACMI Contracts typically require that the Company supply aircraft, crew, maintenance and insurance and that its customers bear all other operating expenses, including fuel and fuel servicing; marketing costs associated with obtaining cargo; airport cargo handling; landing fees; ground handling, aircraft push-back and de-icing services; and specific cargo and mail insurance. The Company's customers are also responsible under these contracts for utilizing the cargo capacity of each of the contracted aircraft. The ACMI Contracts, therefore, minimize for the Company the load factor, yield risk and fuel cost risk traditionally associated with the air cargo business and provide the Company with a minimum annual revenue base and more predictable profit margins. The Company also periodically engages in ad hoc charter or scheduled air service depending on availability of aircraft for these uses. In addition, the Company differentiates itself from other air cargo companies by not directly or indirectly competing with its customers by offering its services to freight forwarders or shippers who do business with the Company's customers. Low Cost Structure. The Company has established itself as a low cost, efficient and reliable provider of air cargo transportation primarily due to the outsourcing of many of its own required services, the advantageous economies of scale realized from the operation of a standardized fleet of long-haul Boeing 747-200 aircraft, and its productive work force. The uniformity of the 747-200 aircraft fleet allows for 2 3 standardization in maintenance and crew training, resulting in substantial cost savings in these areas. In particular, Atlas has advantageous, long-term contracts on a fixed-cost per flight hour basis with leading maintenance providers such as GE and KLM for a significant portion of its on-going aircraft and engine maintenance requirements. As a result of these efficiencies, the Company's high service standards and increased airline industry pressure to reduce costs, the Company's airline customers have determined that outsourcing portions of their air cargo business to the Company can be significantly less costly and offer greater operational flexibility than expanding their cargo operations by purchasing additional aircraft and adding other resources such as personnel and systems. The new 747-400 aircraft are expected to have even greater operational capabilities than the Boeing 747-200 aircraft and will allow the Company to continue to maintain its low cost structure. The new aircraft's higher level of operational reliability and warrantied condition will result in lower maintenance costs during the early years of operation, typically for at least five years. In addition, the acquisition of the 10 747-400 freighter aircraft will make Atlas the largest operator of this aircraft type to date and will enable the Company to achieve economies of scale from the standardization in maintenance and crew training. Expanding Business Base. The growth in demand for air cargo services, combined with the lower rate of growth in passenger-airline cargo capacity and the continuing pressure on the airline industry to reduce operating costs, is expected to provide the Company with the opportunity to expand its air cargo outsourcing services. The primary business focus of most of the Company's customers is on the transportation of passengers, not air cargo. Nevertheless, most passenger airlines have air cargo customers that require quick and dependable air cargo service between hubs serviced by these carriers. To the extent that airlines have cargo capacity on their scheduled flights, which are generally scheduled for the convenience of passengers rather than for the needs of air cargo customers, air cargo service can be provided by them to meet such demand. However, there is a growing trend in the passenger-airline business toward replacing existing widebody passenger aircraft and combination passenger/cargo aircraft with smaller, more efficient (for passenger operations) twin-engine aircraft which have limited cargo space. The Company's customers have therefore found that outsourcing to meet their additional cargo transportation needs rather than allocating significant resources and expanding their fleet of freighter aircraft to effectively service their air cargo customers provides a cost-effective alternative for them to maintain and expand that portion of their business. Increasing Cargo Market Share. The Company has successfully increased its customer base from a single customer in 1992 to nine customers in 1998. In addition, the Company has operated under short-term, seasonal ACMI Contracts with Federal Express Corporation ("FedEx"), Kitty Hawk Aircargo, Inc. ("Kitty Hawk") and United Parcel Service ("UPS") and anticipates providing other short-term, seasonal service. This increased market share is a result of the Company's ability to provide a cost-effective service which has gained acceptance within the industry due to the Company's successful market development efforts. The addition of the 747-400 aircraft will provide the Company with the opportunity to increase its market share to new and existing customers who have a need for the greater payload, extended range and operational reliability of the 747-400, but for whom the purchase of a limited number of 747-400 freighter aircraft would not be cost-effective. In addition, the 747-400 aircraft will give the Company a competitive advantage with new customers who choose to utilize only new or relatively new aircraft or are restricted by local regulations limiting the operation of older aircraft. INDUSTRY BACKGROUND While the air cargo industry is highly competitive, the Company believes that current industry trends are favorable to the continued growth of its business. The world air cargo market is expected to more than triple over the next 20 years. It has grown at an average rate of 7.2% per year from 1986 to 1997. The average annual percentage growth through 2017 is expected to average 6.5%, with international air cargo market growth outpacing U.S. domestic growth. The Company believes this growth has been fueled, in part, by economic growth, the relaxation of international trade barriers (as indicated by the passage of the NAFTA and GATT treaties), reductions in the price of shipping by air, manufacturers' search for low-cost labor in developing countries, and the increasingly time-sensitive nature of product-delivery schedules due to shorter product life- 3 4 cycles and "just-in-time" inventory management. In addition to growth in the global air cargo market, the Company expects to benefit from growth in the export-driven economies of the countries in the Pacific Rim, where the Company has focused a significant amount of its flight operations. According to a Boeing report, eastbound and westbound Trans-Pacific cargo volumes grew at an average annual rate of 6.9% and 14.3%, respectively, between 1986 and 1996, and are projected to grow at an average annual rate of 8.0% and 8.1% between 1996 and 2016. Similarly, northbound and southbound air cargo volumes between North America and South America increased at an average annual rate of 9.4% and 8.8%, respectively, between 1986 and 1996, and are projected to grow at an average annual rate of over 6.5% from 1996 to 2016. Additionally, eastbound and westbound North Atlantic air cargo volumes increased at an average annual rate of 8.4% and 5.9%, respectively, between 1986 and 1996 and are projected to grow at average annual rates of 6.7% and 7.2%, respectively, from 1996 to 2016. The Company believes that, as a U.S. certificated "flag" carrier, it is well positioned to benefit from the progressive expansion of international trade and the consequential growth in global air cargo markets, particularly in Asia, South America and Europe, where the Company has concentrated a significant portion of its resources. The Company has not experienced any adverse impact on its business as a result of the recent turmoil in the Asian financial markets, although there can be no assurances that there will not be any future impact. ACMI CONTRACTS The Company's ACMI Contracts with its customers, which accounted for 96% of the Company's operating revenues in 1997, typically provide for its customers to guarantee monthly minimum aircraft utilization levels at fixed hourly rates and are typically in force for periods of three to five years, subject in certain limited cases to early termination provisions. These contracts typically require that the Company supply aircraft, crew, maintenance and insurance and that its customers bear all other operating expenses, including fuel and fuel servicing; marketing costs associated with obtaining cargo; airport cargo handling; landing fees; ground handling, aircraft push-back and de-icing services; and specific cargo and mail insurance. These contracts, therefore, minimize for the Company the load factor and yield risk traditionally associated with the air cargo business. The ACMI Contracts typically require minimum air freight capacity to be provided to its customers by the Company. All of the Company's revenues, and virtually all of its costs, are in U.S. dollars, thus avoiding currency risks normally associated with doing business primarily overseas. The Company is currently operating under 15 ACMI Contracts: five with China Airlines, two each with Fast Air and LAS and one each with British Airways, Emirates, KLM, Lufthansa, SAS and Thai Airways. In most cases, one aircraft is dedicated under each contract. In addition, the Company recently reached an agreement with China Airlines for a sixth ACMI Contract, which the Company expects to commence in the second quarter of 1998. China Airlines, Fast Air and Lufthansa accounted for approximately 34%, 11% and 8%, of the Company's total revenues, respectively, for the year ended December 31, 1997. In addition, the Company has also operated short-term, seasonal ACMI Contracts with FedEx, Kitty Hawk and UPS and anticipates doing so in the future from time to time. Certain of the Company's ACMI Contracts allow the Company's customers to cancel up to a maximum of approximately 5% of the guaranteed hours of aircraft utilization over the course of a year. The Company's customers most often exercise such cancellation options early in the first quarter or late in the fourth quarter of the year, when the demand for air cargo capacity has been historically lower. The Company has found that such cancellations provide a timely opportunity for the scheduling of maintenance on its aircraft, to the extent possible. See "-- Maintenance." The ACMI Contracts are typically in force for periods of three to five years, subject in certain limited cases to early termination provisions. The Company believes that its relationships with its customers are mutually satisfactory, as evidenced by the fact that within the last three years, it has renewed twelve ACMI Contracts and added nine ACMI Contracts with its existing customers, although there can be no assurance that future such contracts will not be canceled in accordance with their terms. All of the ACMI Contracts provide that each of the Company's aircraft be deemed to be at all times under the exclusive operating control, possession and direction of the Company and that, in order to service the routes designated by the contract, the Company obtain the authority from the governments having jurisdiction over the route. See "-- Governmental Regulation." Additionally, if the Company is required to use the customer's "call sign" in identifying itself throughout its route, the customer must also have obtained 4 5 underlying authority from the governments having jurisdiction over the route. Therefore, the Company's route structure is limited to areas in which it can gain access from the appropriate governments. OTHER FLIGHT OPERATIONS To the extent the Company has available excess aircraft capacity at any time, it will seek to obtain ad hoc charter service contracts, which the Company believes are generally readily available. In addition, in the past the Company has provided service to FedEx, Kitty Hawk and UPS pursuant to short-term, seasonal ACMI Contracts during periods of excess aircraft capacity. SALES AND MARKETING From its offices in Colorado, New York and Miami, the Company services its air cargo customers and solicits ACMI Contract business. The Company's efforts to obtain new ACMI Contract business focus principally on international airlines with established air cargo customers, high operating costs and hub and spoke systems which gather cargo at a particular location and which have the need for long-distance capacity to move such cargo to another distribution point. On occasion, the Company may utilize independent cargo brokers to obtain new ACMI Contracts. The Company markets its services by guaranteeing its customers a reliable, low-cost dedicated aircraft with the capacity to ensure the efficient linkage of such customers' distribution points without the customers having to purchase and maintain additional aircraft, schedule additional flights and add other resources. The Company expects to place the 747-400 aircraft in service with both existing and prospective customers, which the Company believes should be willing to pay higher ACMI Contract rates to achieve operating benefits derived from the unique performance capabilities of the 747-400 aircraft such as its longer range, greater payload and increased fuel efficiency. MAINTENANCE Due to the average age of the Company's Boeing 747-200 fleet, it is likely that the aircraft will require greater maintenance than newer aircraft such as the 747-400 aircraft. See "-- Aircraft." Aircraft maintenance includes, among other things, routine daily maintenance, maintenance every six weeks (an "A Check"), significant maintenance work every 18 months (a "C Check") and major maintenance events every five years or 25,000 flight hours, whichever comes later if the aircraft is over the age of 18 years, or every six years or 25,000 flight hours, whichever comes later for aircraft under the age of 18 years, with a maximum interval in either case of nine years (a "D Check"). The Company attempts to schedule major maintenance on its aircraft in the first quarter of the calendar year, when the demand for air cargo capacity has historically been lower, taking advantage of cancellations of flights by the Company's customers that generally occur most frequently during these periods. Pursuant to a maintenance contract with KLM (the "Maintenance Contract") in effect until January 2005, a significant part of the regular maintenance (principally C Checks and engine overhauls, excluding D Checks) of certain of the Company's aircraft and their GE engines is undertaken by KLM, primarily at its maintenance base located at Schiphol International Airport in Amsterdam, The Netherlands. KLM supplies engineering and diagnostic testing for each aircraft and its components in compliance with the Federal Aviation Administration (the "FAA") and other applicable regulations. The Maintenance Contract provides that KLM, subject to certain terms and conditions, will perform repairs and maintenance of the Company's aircraft on the same basis and order of priority as repairs to its own fleet. Such service is provided to the Company at a cost, for which a large part is a fixed rate per flight hour, subject to a 3.5% annual escalation factor for the first five years. Pratt & Whitney Corporation ("P&W") engines are serviced elsewhere, each at a cost based upon the actual time and material necessary for such service. Under the terms of the Maintenance Contract, in the event that the Company wishes to maintain more than 12 of its aircraft under such contract, the terms of the contract are subject to adjustment by KLM. Twelve of the Company's aircraft are currently subject to the Maintenance Contract. In June 1996, the Company entered into a ten year engine maintenance agreement with GE for the engine maintenance of up to 15 aircraft powered by CF6-50E2 engines at a fixed rate per flight hour, subject 5 6 to an annual formula increase. The agreement commenced in the third quarter of 1996 with the acceptance of engines associated with aircraft acquired in the third and fourth quarter of 1996. Effective in the year 2000, the Company has an option to add not less than 40 engines to the program. During the initial operating period, the 747-400 aircraft's airframe and engines will be covered under manufacturer's warranties. As a result, the Company does not expect to incur significant maintenance expense in connection with the 747-400 aircraft during the warranty period. In addition, the 747-400 aircraft's limited maintenance requirements will provide a higher operational reliability with lower maintenance costs during the early years of operation, typically for at least five years. The Company will incur expenses associated with routine daily maintenance of both the airframe and the engines. In connection with the GE engine purchase agreement, the Company is currently in negotiations with GE to provide ongoing maintenance on the 747-400 aircraft engines. The Company believes that fixed-cost contracts provide the most efficient means of ensuring the continued service of its aircraft fleet and the most reliable way by which to predict its maintenance costs; however, the Company believes it is more cost effective for routine line maintenance and A Checks to be performed on a time and material basis due to the frequency of such maintenance. The Company also has a contract with B.F. Goodrich Co. to perform maintenance on its brakes and for the replacement of tires. The Company has an agreement, subject to acceptable rates, terms and conditions, with Linee Aeree Italiane S.p.A. ("Alitalia") to utilize, or find other parties to utilize, an amount of Alitalia's maintenance services with an aggregate cost of $25 million over a five-year period ending in June 2000. GOVERNMENTAL REGULATION Under the Federal Aviation Act of 1958 (the "Aviation Act"), the Department of Transportation (the "DOT") and the FAA exercise regulatory authority over the Company. The DOT's jurisdiction extends primarily to economic issues related to the air transportation industry, including, among other things, air carrier certification and fitness, insurance, certain leasing arrangements, the authorization of proposed scheduled and charter operations, tariffs, consumer protection, unfair methods of competition, unjust discrimination and deceptive practices. The FAA's regulatory authority relates primarily to air safety, including aircraft certification and operations, crew licensing/training and maintenance standards. To provide air cargo transportation services under long-term contracts with major international airlines, the Company relies primarily on its worldwide charter authorities. The Company requires separate DOT and FAA approval for each long-term ACMI Contract. In addition, FAA approval is required for each of the Company's short-term, seasonal ACMI Contracts. In order to engage in its air transportation business, the Company is required to maintain a Certificate of Public Convenience and Necessity (a "CPCN") from the DOT. Prior to issuing a CPCN, the DOT examines a company's managerial competence, financial resources and plans and compliance disposition in order to determine whether a carrier is fit, willing and able to engage in the transportation services it has proposed to undertake, and whether a carrier conforms with the Aviation Act requirement that the transportation services proposed are consistent with the public convenience and necessity. Among other things, a company holding a CPCN must qualify as a United States citizen, which requires that it be organized under the laws of the United States or a State, Territory or Possession thereof; that its Chief Executive Officer and at least two-thirds of its Board of Directors and other managing officers be United States citizens; that not more than 25% of its voting stock be owned or controlled, directly or indirectly, by foreign nationals; and that it not otherwise be subject to foreign control. The DOT may impose conditions or restrictions on such a CPCN. The DOT has issued the Company a CPCN to engage in interstate and overseas air transportation of property and mail, and a CPCN to engage in foreign air transportation of property and mail between the U.S. and Taiwan. Both CPCNs are subject to standard terms, conditions and limitations. By virtue of holding those CPCNs, the Company possesses worldwide charter authorities. It also holds limited-term DOT exemption authority to engage in scheduled air transportation of property and mail between certain points in the U.S. and Hong Kong. 6 7 International air services are generally governed by a network of bilateral civil air transport agreements in which rights are exchanged between governments, which then select and designate air carriers authorized to exercise such rights. Insofar as scheduled service is involved, bilateral agreements may prohibit services to certain countries. For countries in which service is authorized, these bilateral agreements specify the city-pair markets that may be served; may restrict the number of carriers that may be designated; may provide for prior approval by one or both governments of the prices the carriers may charge; may limit frequencies or the amount of capacity to be offered in the market; and, in various other ways, may impose limitations on the operations of air carriers. To obtain authority under a bilateral agreement, it is often necessary to compete against other carriers in a DOT proceeding. At the conclusion of the proceeding, the DOT awards all route authorizations. The provisions of bilateral agreements pertaining to charter services vary considerably from country to country. Some agreements limit the number of charter flights that carriers of each country may operate. The Company is subject to various international bilateral air services agreements between the U.S. and the countries to which the Company provides service. The Company also operates on behalf of foreign flag air carriers between various foreign points without serving the U.S. These services are subject to the bilateral agreements of the respective governments. Furthermore, these services require FAA approval but not DOT approval. The Company must obtain permission from the applicable foreign governments to provide service to foreign points. The Company has obtained an operating certificate issued by the FAA pursuant to Part 121 of the Federal Aviation Regulations. The FAA has jurisdiction over the regulation of flight operations generally, including the licensing of pilots and maintenance personnel; the establishment of minimum standards for training and retraining; maintenance of technical standards for flight, communications and ground equipment; security programs; and other matters affecting air safety. In addition, the FAA mandates certain recordkeeping procedures. The Company must obtain and maintain FAA certificates of airworthiness for all of its aircraft. The Company's aircraft, flight personnel and flight and emergency procedures are subject to periodic inspections and tests by the FAA. All air carriers operating to, from or within the United States are subject to the strict scrutiny of the FAA to ensure proper compliance with FAA regulations. The DOT and the FAA have authority under the Aviation Safety and Noise Abatement Act of 1979, as amended and recodified, and under the Airport Noise and Capacity Act of 1990, to monitor and regulate aircraft engine noise. All of the Company's existing fleet of aircraft comply with Stage III Standards -- the highest standard issued by the FAA. Under the FAA's Directives issued under its "Aging Aircraft" program, the Company is subject to extensive aircraft examinations and may be required to undertake structural modifications to address the problem of corrosion and structural fatigue. In November 1994, Boeing issued Nacelle Strut Modification Service Bulletins which have been converted into Directives by the FAA. Twelve of the Company's Boeing 747-200 aircraft will have to be brought into compliance with such Directives within the next three years at an estimated cost of approximately $6.0 million. As part of the FAA's overall Aging Aircraft program, it has issued Directives requiring certain additional aircraft modifications to be accomplished prior to the aircraft reaching 20,000 cycles. The average cycle time for the 17 aircraft in service is approximately 12,000 cycles and the average cycles operated per year is approximately 800 cycles. The Company estimates that the modification costs per aircraft will range between $2 million and $3 million. Between now and the year 2000, only one aircraft is expected to reach the 20,000 cycle limit and nine additional aircraft will require modification prior to the year 2009. The remaining seven aircraft have already undergone such modifications. The two aircraft undergoing modification to freighter configuration will receive the Nacelle Strut Modification as part of the freighter conversion. Other Directives have been issued that require inspections and minor modifications to Boeing 747-200 aircraft. It is possible that additional Directives applicable to the types of aircraft or engines included in the Company's fleet could be issued in the future, the cost of which could be substantial. The Company is also subject to the regulations of the Environmental Protection Agency regarding air quality in the U.S. With respect to aircraft that it operates, the Company meets the fuel venting requirements and smoke emissions standards established by the Environmental Protection Agency. 7 8 COMPETITION The market for air cargo services is highly competitive. A number of airlines currently provide services for themselves and for others similar to the services offered by the Company and new airlines may be formed that would also compete with the Company. Such airlines may have substantially greater financial resources than the Company. The Company believes that the most important factors for competition in the air cargo business are the range, payload and cubic capacities of the aircraft and the price, flexibility, quality and reliability of service. The ability of the Company to achieve its strategic plan depends in part upon its success in convincing major international airlines that outsourcing some portion of their air cargo business remains more cost- effective than undertaking cargo operations with their own incremental capacity and resources and the ability of the Company to obtain higher ACMI Contract rates in connection with the 747-400 aircraft compared to those currently obtained in connection with existing Boeing 747-200 aircraft. The Company believes that such higher rates will be obtainable as a result of the unique operating benefits associated with the 747-400 aircraft. These operational benefits include a longer range, greater payload capability and increased fuel efficiency relative to the Boeing 747-200 aircraft. FUEL Although fuel costs are typically the largest operating expense for airlines, the Company has limited exposure to the fluctuation of fuel costs and disruptions in supply as a result of its ACMI Contracts, which require the customers to provide fuel for the aircraft. However, an increase in fuel costs could reduce the Company's cost advantages because of its older Boeing 747-200 aircraft fleet, which are not as fuel-efficient as newer cargo aircraft such as the 747-400 aircraft. In addition, to the extent the Company operates scheduled cargo or ad hoc charter services, or positions its aircraft, it is responsible for fuel and other costs that are normally borne by the customers under the ACMI Contracts. In 1997, approximately 2% of the Company's block hours represented scheduled cargo, ad hoc charter services or positioning its aircraft for its own account. The Company may, at times, have excess capacity in which case it may deploy such aircraft in scheduled cargo or ad hoc charter services. EMPLOYEES As of March 1, 1998, the Company had 676 employees, 382 of whom were air crew members. The Company expects to hire additional pilots in 1998 associated with the delivery of additional aircraft, including the 747-400 aircraft. The Company maintains a comprehensive training program for its pilots in compliance with FAA requirements in which each pilot regularly attends update programs. The Company believes that its current training program can be sufficiently modified to provide training required for pilots for the 747-400 aircraft. In addition, as part of the Boeing Purchase Agreement, to defray a portion of the costs, Boeing will train a limited number of the Company's pilots and crew to be assigned to the 747-400 aircraft. However, the Company may incur incremental costs associated with ongoing training with regard to the 747-400 aircraft. The Company believes that its employees' participation in the growth and profitability of its business is essential to maintain its productivity and low cost structure, and has therefore established programs for that purpose such as a profit sharing plan, a stock purchase plan, and a Company percentage contribution of the employee deferral contribution to a retirement plan (Internal Revenue Code of 1986, as amended, Section 401(k) plan). Such programs are designed to allow employees to share financially in the Company's success and to augment base salary levels and retirement income. The Company considers its relations with its employees to be good. The Company's labor relations are covered under Title II of the Railway Labor Act of 1926, as amended, and are subject to the jurisdiction of the National Mediation Board. None of the Company's employees is subject to a collective bargaining agreement; however, many airline industry employees are subject to such agreements and the Company's employees have been and are routinely solicited by union representatives seeking to organize them. In January 1998, the Company's pilots rejected union representation by the Air Line Pilots Association. 8 9 INSURANCE The Company is vulnerable to potential losses which may be incurred in the event of an aircraft accident. Any such accident could involve not only repair or replacement of a damaged aircraft and its consequent temporary or permanent loss from service, but also potential claims involving injury to persons or property. The Company is required by the DOT to carry liability insurance on each of its aircraft, and each of the Company's aircraft leases and ACMI Contracts also requires the Company to carry such insurance. While the Company carries this insurance, any extended interruption of the Company's operations due to the loss of an aircraft could have a material adverse effect on the Company. The Company currently maintains public liability and property damage insurance and aircraft hull and liability insurance for each of the aircraft in the fleet in amounts consistent with industry standards. The Company maintains baggage and cargo liability insurance if not provided by its customers under ACMI Contracts. Although the Company believes that its insurance coverage is adequate, there can be no assurance that the amount of such coverage will not be changed upon renewal or that the Company will not be forced to bear substantial losses from accidents. Substantial claims resulting from an accident could have a material adverse effect on the Company's financial condition and could affect the ability of the Company to obtain insurance in the future. The Company believes that it has good relations with its insurance providers. ITEM 2. PROPERTIES AIRCRAFT The Company's utilization of Boeing 747 aircraft provides significant marketing advantages because these aircraft, relative to most other cargo aircraft that are commercially available, have higher maximum payload and cubic capacities, and longer range. The uniformity of the Company's current Boeing 747-200 aircraft fleet allows for standardization in maintenance and crew training, resulting in substantial cost savings in these areas. The new 747-400 aircraft are expected to have greater operational capabilities than the 747-200 aircraft and will allow the Company to continue to maintain its low cost structure despite their higher acquisition cost. The new aircraft's limited maintenance requirements will provide a higher level of operational reliability with lower maintenance costs during the early years of operation, typically for at least five years. In addition, the acquisition of the 10 747-400 freighter aircraft will make Atlas the largest operator of this aircraft type to date and will enable the Company to capitalize on economies of scale from the standardization in maintenance and crew training. In January 1998, the Company's leases for five Boeing 747-200 from FedEx expired and the aircraft were returned. The Company expects to make up this loss of capacity through the utilization of the two aircraft in conversion and with the delivery of five 747-400 aircraft during the second half of 1998. The following table describes, as of March 16, 1998, the Company's existing fleet, aircraft currently undergoing passenger to freighter modification and the 747-400 aircraft subject to the Boeing Purchase Agreement. FLEET PROFILE
NUMBER AIRCRAFT YEAR OF OF AIRCRAFT TYPE OWNED/LEASED MANUFACTURE ----------- -------- ------------ ----------- Existing fleet:.............................. 16 747-200 Owned(1) 1974-1986 1 747-200 Leased(2) 1976 Modification aircraft:....................... 2 747-200 Owned(3) 1979 747-400 aircraft on order:................... 10 747-400 (4) 1998-2000
- --------------- (1) Two aircraft are powered by P&W engines and 14 are powered by GE engines. (2) The aircraft is leased from a third party under a lease expiring in March 2010 and is powered by GE engines. 9 10 (3) These passenger aircraft are powered by GE engines and are currently undergoing conversion to freighter configuration by Boeing. The aircraft are expected to be placed in service in the second quarter and early in the third quarter of 1998. (4) The Company has agreed to purchase 10 new Boeing 747-400 freighter aircraft, with options to purchase an additional 10 aircraft. The first 10 aircraft are scheduled to be delivered as follows: five in 1998, two in 1999 and three in 2000. See "-- 747-400 Aircraft Acquisition." These aircraft will be powered by GE engines. Debt financing for the first five aircraft has been secured through the EETCs (see "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Recent Developments"). In addition, the Company may arrange for tax-oriented long-term leases on some or all of these aircraft. The Company has been successful in obtaining new customers, or additional arrangements with existing customers coincident with the delivery of aircraft into the fleet, or soon thereafter. However, from time to time, the Company accepts delivery of aircraft that have not been committed to a particular ACMI Contract. These aircraft have been utilized temporarily as replacement aircraft during scheduled and unscheduled maintenance of other aircraft, as well as for ad hoc charter arrangements. Although the Company intends to have new ACMI Contracts in place upon delivery of aircraft, including the 747-400 aircraft, there can be no assurance that such arrangements will have been made. From time to time, the Company engages in discussions with third parties regarding possible acquisitions of aircraft that could expand the Company's operations. The Company is in discussions with third parties for the possible acquisition of additional aircraft for delivery in 1998 and beyond. 747-400 AIRCRAFT ACQUISITION In June 1997, the Company entered into the Boeing Purchase Agreement to purchase 10 new 747-400 freighter aircraft to be powered by GE engines. The 747-400 freighter aircraft are currently scheduled to be delivered as follows: five in 1998, two in 1999 and three in 2000. Due to production problems at Boeing, the Company believes that each of the 1998 delivery positions of the 747-400 aircraft may be delayed up to 60 days. While Boeing will compensate the Company for defined delays in delivery of the 747-400 aircraft, any such delays may adversely impact the Company's ability to initiate service with prospective customers in a timely fashion. The Boeing Purchase Agreement also provides the Company with options to purchase up to 10 additional 747-400 freighter aircraft for delivery from 1999 through 2002. As a result of the Company being the largest purchaser of 747-400 freighter aircraft to date, it was able to negotiate from Boeing and GE a significant discount off the aggregate list price of $1.7 billion for the 10 747-400 freighter aircraft, four installed engines per aircraft and five spare engines. In addition, the Company also obtained certain ancillary products and services at advantageous prices. FACILITIES The Company's principal executive offices are located in a 7,000 square foot office building owned by the Company at 538 Commons Drive, Golden, Colorado. The Company also rents 2,500 square feet of office space in an adjacent building. The Company presently occupies a 22,000 square foot facility located at John F. Kennedy International Airport ("JFK"). This facility includes administrative offices, maintenance work areas and hangar and parts storage facilities, as well as flight dispatch operations. The Company occupies this facility pursuant to a lease agreement with Japan Airlines ("JAL") for a five-year period with two five-year renewal rights from JAL, which began on June 1, 1995, at a monthly rate of approximately $55,000. The Company believes the JAL facility is adequate to support the near term growth in operations that will result from the anticipated acquisition of additional aircraft. In addition, the Company leases 7,750 square feet of warehouse space at JFK for the storage of aircraft components, tires and other aircraft related equipment at a monthly lease rate of $5,000. The initial lease term expires at the end of August 1999 and provides for two one-year renewal option periods beginning September 1, 1999. 10 11 Due to increased operations at Miami International Airport, the Company entered into a month-to-month office lease and a month-to-month warehouse lease with Dade County, Florida in March 1997 at a combined monthly lease rate of approximately $6,000. The leased warehouse space is used to store aviation equipment and aircraft components used to maintain aircraft operated by the Company. ITEM 3. LEGAL PROCEEDINGS On February 24, 1997, the Company filed a complaint for declaratory judgment in the Colorado District Court, Jefferson County against Israel Aircraft Industries Ltd. ("IAI") for mechanical problems the Company experienced with respect to an aircraft the Company sub-leased from IAI. The Company is seeking approximately $4 million in damages against IAI to be offset by the amount, if any, the Company owes IAI pursuant to the sub-lease. IAI had the case removed to the U.S. District Court, District of Colorado on April 21, 1997 and has filed counterclaims alleging damages of approximately $9 million based on claims arising from the sub-lease. The Company intends to vigorously defend against all of IAI's claims. In March 1997, Air Support International, Inc. ("ASI") filed a complaint against the Company in the U.S. District Court, Eastern District of New York alleging actual and punitive damages of approximately $13.5 million arising from the Company's refusal to pay commissions which ASI claims it is owed for allegedly arranging certain ACMI Contracts. The Company intends to vigorously defend against all of ASI's claims. While the Company is from time to time involved in litigation in the ordinary course of its business, there are no other material legal proceedings pending against the Company or to which any of its property is subject. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the Company's security holders during the fourth quarter of 1997. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK & RELATED SECURITY HOLDER MATTERS In November 1997, the Company's common stock commenced trading on the New York Stock Exchange ("NYSE") under the symbol "CGO." Prior to that, the Company's common stock traded on the Nasdaq National Market ("Nasdaq/NM") under the trading symbol "ATLS." The approximate number of shareholders of record at March 16, 1998 was 248. The following table sets forth for the periods indicated the high and low bid quotations, as quoted by the NYSE and Nasdaq/NM. Such quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
1997 1996 ------------- ------------- HIGH LOW HIGH LOW ---- --- ---- --- QUARTER ENDED March 31.................................................. $47 3/4 $19 7/8 $41 7/8 $15 June 30................................................... 35 7/8 24 64 1/4 36 3/4 September 30.............................................. 34 1/4 21 3/8 58 1/4 36 3/4 December 31............................................... 29 1/4 21 7/8 50 7/8 28 1/8
The Company has not declared any cash dividends and does not plan to do so in the foreseeable future. The indentures governing the Company's 12 1/4% Senior Secured Notes due 2002 (the "Equipment Notes") and the Company's unsecured 10 3/4% Senior Notes due 2005 (the "Senior Notes") in certain circumstances may restrict the Company from paying dividends or making other distributions on its common stock. See Note 3 to the Consolidated Financial Statements of the Company. 11 12 ITEM 6. SELECTED FINANCIAL DATA The selected financial data presented below have been derived from the consolidated financial statements of the Company. This information should be read in conjunction with the consolidated financial statements and related notes, and Management's Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this report.
YEARS ENDED DECEMBER 31, ---------------------------------------------------- 1997 1996 1995 1994 1993 -------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) STATEMENT OF OPERATIONS DATA: Operating revenues...................... $401,041 $315,659 $171,267 $102,979 $ 41,263 Operating income........................ 56,002 88,063 42,674 13,894 446 Income (loss) before extraordinary item.................................. 6,689 37,838 17,831 3,586 (8,023) Net income (loss)....................... 23,429 37,838 17,831 3,586 (8,023) Basic EPS: Income (loss) before extraordinary item per common share.............. .30 1.76 1.06 .24 (.53) Net income (loss) per common share.... 1.04 1.76 1.06 .24 (.53) Weighted average common shares outstanding during the period...... 22,450 21,503 16,783 15,000 15,000 Diluted EPS: Income (loss) before extraordinary item per common share.............. .30 1.72 1.06 .24 (.53) Net income (loss) per common share.... 1.04 1.72 1.06 .24 (.53) Weighted average common shares outstanding during the period...... 22,585 21,779 16,852 15,000 15,000
AT DECEMBER 31, ------------------------------------------------------ 1997 1996 1995 1994 1993 ---------- -------- -------- -------- -------- (IN THOUSANDS) BALANCE SHEET DATA: Cash and short-term investments........ $ 152,969 $124,663 $ 96,990 $ 10,524 $ 6,198 Working capital (deficit).............. 80,363 98,675 81,022 (1,937) (5,291) Total assets........................... 1,297,415 773,707 447,323 162,731 125,005 Long-term debt, net of current portion.............................. 736,026 462,868 335,902 158,730 129,663 Deferred Aircraft Obligations.......... 163,167 -- -- -- -- Stockholders' equity (deficit)......... 238,829 215,785 68,715 (15,753) (19,339)
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The cargo operations of the Company's airline customers are seasonal in nature, with peak activity occurring traditionally in the second half of the year, and with a significant decline occurring in the first quarter. This decline in cargo activity is largely due to the decrease in shipping that occurs following the December and January holiday seasons associated with the celebration of Christmas and the Chinese New Year. Certain of the Company's customers have, in the past, elected to use that period of the year to exercise their contractual options to cancel a limited number (generally not more than 5% per year) of guaranteed hours with the Company, and are expected to continue to do so in the future. As a result, the Company's revenues typically decline in the first quarter of the year as its contractual aircraft utilization level temporarily decreases. The Company seeks to schedule, to the extent possible, its major aircraft maintenance activities during this period to take advantage of any unutilized aircraft time. 12 13 The aircraft acquisitions, lease arrangements and modification schedule are described in Note 6 of the Company's December 31, 1997 Consolidated Financial Statements. The timing of when an aircraft enters the Company's fleet can affect not only annual performance, but can make quarterly results vary, thereby affecting the comparability of operations from period to period. The tables below set forth selected financial and operating data for the four quarters of the years ended December 31, 1997, 1996 and 1995 (dollars in thousands).
1997 --------------------------------------------------------- 4TH 3RD 2ND 1ST CUMULATIVE QUARTER QUARTER QUARTER QUARTER ---------- -------- -------- -------- ------- Total operating revenues.............. $401,041 $120,893 $104,197 $ 93,902 $82,049 Operating expenses.................... 345,039 93,112 82,464 104,556 64,907 Operating income (loss)............... 56,002 27,781 21,733 (10,654) 17,142 Other (expense)....................... (45,469) (13,383) (11,930) (10,908) (9,248) Net income............................ 23,429 9,143 6,225 3,048 5,013 Block hours........................... 75,254 22,333 19,937 17,541 15,443 Average aircraft operated............. 19.5 20.9 20.4 19.5 17.2 Operating margin (deficit)............ 14.0% 23.0% 20.9% (11.4)% 20.9%
1996 --------------------------------------------------------- 4TH 3RD 2ND 1ST CUMULATIVE QUARTER QUARTER QUARTER QUARTER ---------- -------- -------- -------- ------- Total operating revenues.............. $315,659 $104,715 $ 79,681 $ 72,614 $58,649 Operating expenses.................... 227,596 74,775 59,635 49,947 43,239 Operating income...................... 88,063 29,940 20,046 22,667 15,410 Other (expense)....................... (28,475) (8,569) (7,207) (6,982) (5,717) Net income............................ 37,838 13,397 8,201 10,037 6,203 Block hours........................... 59,445 18,803 15,444 14,073 11,125 Average aircraft operated............. 14.7 18.4 15.4 14.0 10.8 Operating margin...................... 27.9% 28.6% 25.2% 31.2% 26.3%
1995 --------------------------------------------------------- 4TH 3RD 2ND 1ST CUMULATIVE QUARTER QUARTER QUARTER QUARTER ---------- -------- -------- -------- ------- Total operating revenues.............. $171,267 $ 56,142 $ 47,769 $ 38,418 $28,938 Operating expenses.................... 128,593 39,982 34,844 28,370 25,397 Operating income...................... 42,674 16,160 12,925 10,048 3,541 Other (expense)....................... (16,435) (4,014) (4,805) (4,287) (3,330) Net income............................ 17,831 8,352 5,568 3,861 50 Block hours........................... 33,265 10,809 9,076 7,568 5,812 Average aircraft operated............. 7.7 9.4 8.2 6.9 6.1 Operating margin...................... 24.9% 28.8% 27.1% 26.2% 12.2%
1997 Compared to 1996 Operating Revenues and Results of Operations. Total operating revenues for the year ended December 31, 1997 increased to $401.0 million compared to $315.7 million for 1996, an increase of approximately 27%. The average number of aircraft in the Company's fleet during 1997 was 19.5 compared to 14.7 during 1996. Total block hours for 1997 were 75,254 compared to 59,445 for 1996, an increase of approximately 27%, principally reflecting the increase in the size of the Company's fleet. Revenue per block hour increased by approximately .4% to $5,329 for 1997 compared to $5,310 for 1996. The Company's operating results decreased from an $88.1 million operating profit in 1996 to a $56.0 million operating profit in 1997, primarily due to the largely non-cash charge to earnings of $27.1 million in the second quarter of 1997. The after-tax effect of this second quarter charge was substantially offset by the after-tax effect of the extraordinary gain on 13 14 early extinguishment of debt in the same quarter of 1997. Net income of $37.8 million for 1996 declined to a net income of $23.4 million for 1997, primarily due to the increase in interest expense associated with the increase in aircraft in service year over year and the higher maintenance costs with respect to the aircraft sub-leased from FedEx. Operating levels increased during the second quarter of 1997 as a result of placing in service two additional aircraft upon completion of their respective cargo modifications by Boeing, one in March 1997 and one in May 1997. In addition, the Company placed in service the fifth FedEx aircraft in April 1997. In August 1997 and at the end of September 1997, the Company took delivery of the fifth and sixth Thai Aircraft, respectively, upon completion by Boeing of its modification to cargo configuration. At the end of 1997, the Company removed from revenue service the five aircraft sub-leased from FedEx in preparation for the return of these aircraft to FedEx in the first quarter of 1998, as provided for in the sub-leases. The Company's operating levels increased moderately during 1997 as a result of these aircraft acquisitions. Block hours increased from 15,443 in the first quarter of 1997 to 22,333 in the fourth quarter of 1997, reflecting the growth in the average fleet size from 17.2 aircraft to 20.9 aircraft for the two periods. Total operating revenue increased from $82.0 million in the first quarter to $120.9 million in the fourth quarter, representing slightly higher block hour rates for the fourth quarter compared to those of the first quarter of 1997, primarily due to the seasonality of the business of the Company's customers. The Company achieved $27.8 million operating income and $9.1 million net income in the fourth quarter of 1997, compared to $17.1 million operating income and $5.0 million net income in the first quarter of 1997. In the second quarter of 1997, the Company recorded a largely non-cash charge of $27.1 million to operating income. This charge included the write-off of the Company's remaining balance sheet investment in the five aircraft sub-leased from FedEx, as well as the establishment of certain reserves associated with costs necessary to return the aircraft in the first quarter of 1998 and other non-recurring items. Excluding this charge, operating income was $83.1 million for 1997 compared to $88.1 million for 1996, or a decrease of approximately 6%. There were an average of 4.4 aircraft subleased from FedEx operating in 1997 compared to an average of 1.7 aircraft sub-leased from FedEx operating in 1996. Maintenance costs with respect to the FedEx aircraft were substantially higher than for the rest of the Company's fleet. In addition, the Company incurred $1.2 million of costs in the first quarter of 1997 related to the return of two leased aircraft to their respective lessors. In the second quarter of 1997, the realization of an after-tax extraordinary gain of $16.7 million, resulting from the receipt of a prepayment incentive credit associated with the refinancing of approximately $228 million of indebtedness during the second quarter, for the most part offset the $17.2 million after-tax impact of the non-recurring charge discussed above. Operating Expenses. The Company's principal operating expenses include flight crew salaries and benefits; other flight-related expenses; maintenance; aircraft and engine rentals; fuel costs and ground handling; depreciation and amortization; and selling, general and administrative expenses. Flight crew salaries and benefits include all such expenses for the Company's pilot work force. Flight crew salaries and benefits increased to $30.2 million in 1997 compared to $25.0 million in 1996, due to increases in the number of aircraft in the Company's fleet and aircraft block hours. While actual expense increased by approximately 21% during 1997, on a block hour basis this expense declined by approximately 5% to $401 per block hour for 1997 from $421 per block hour for 1996. This reduction was due to increased efficiency in staffing levels and scheduling resulting from the increased level of operations. Other flight-related expenses include hull and liability insurance on the Company's fleet of Boeing 747-200 aircraft, crew travel and meal expenses, initial and recurring crew training costs and other expenses necessary to conduct its flight operations. Other flight-related expenses increased to $28.8 million in 1997 compared to $27.4 million in 1996, or approximately 5%. The impact of the larger fleet size for 1997 compared to the prior year was partially offset by a reduction in the Company's aircraft hull and liability insurance rates based on its increased size and favorable operating history. As a result of this and other operating efficiencies, on a block hour basis, other 14 15 flight-related expenses declined by approximately 17% to $383 per block hour for 1997 compared to $461 per block hour for 1996. Maintenance expenses include all expenses related to the upkeep of the aircraft, including maintenance, labor, parts, supplies and maintenance reserves. The costs of C Checks, D Checks and engine overhauls not otherwise covered by maintenance reserves are capitalized as they are incurred and amortized over the life of the maintenance event. In addition, in January 1995 the Company contracted with KLM for a significant part of its regular maintenance operations and support on a fixed cost per flight hour basis. Effective October 1996, certain aircraft engines were accepted into the GE engine maintenance program, also on a fixed cost per flight hour basis, pursuant to a 10 year maintenance agreement. Maintenance expense increased to $123.8 million in 1997 from $84.3 million in 1996, or approximately 47%, partially due to the increase in the Company's average fleet size and partially due to the higher maintenance costs with respect to the aircraft sub-leased from FedEx. On a block hour basis, maintenance expense increased year over year by approximately 16%, primarily due to higher maintenance costs associated with the aircraft sub-leased from FedEx. Aircraft and engine rentals include the cost of leasing aircraft and spare engines, as well as the cost of short-term engine leases required to replace engines removed from the Company's aircraft for either scheduled or unscheduled maintenance and any related short-term replacement aircraft lease costs. Aircraft and engine rentals were $31.6 million in 1997 compared to $27.3 million in 1996, or an increase of approximately 16%, of which approximately $2.6 million was due to higher lease rates in 1997 compared to 1996 and $3.1 million was due to an additional .5 aircraft leased in 1997 over 1996. This increase was partially offset by a $1.4 million decrease in engine rentals year over year, due to additional spare engines purchased by the Company in 1997. Because of the nature of the Company's ACMI contracts with its airline customers, under which the Company is responsible only for the ownership cost and maintenance of the aircraft and for supplying aircraft crews and insurance, the Company's airline customers bear all other operating expenses, including fuel and fuel servicing; marketing costs associated with obtaining cargo; airport cargo handling; landing fees; ground handling; aircraft push-back and de-icing services; and specific cargo and mail insurance. As a result, the Company incurs fuel and ground handling expenses only when it operates on its own behalf, either in scheduled services, for ad hoc charters or for ferry flights. Fuel expenses for the Company's non-ACMI contract services include both the direct cost of aircraft fuel as well as the cost of delivering fuel into the aircraft. Ground handling expenses for non-ACMI contract service include the costs associated with servicing the Company's aircraft at the various airports to which it operates as well as other direct flight related costs. Fuel and ground handling costs increased to $10.8 million for 1997 compared to $10.6 million for 1996, or an increase of approximately 3%. This was due to higher fuel prices in 1997 compared to 1996, partially offset by the relative decrease in scheduled service, charter and other non-ACMI block hours to 1,787 block hours in 1997 from 2,042 block hours in 1996. Depreciation and amortization expense includes depreciation on aircraft, spare parts and ground equipment, and the amortization of capitalized major aircraft maintenance and engine overhauls. Depreciation and amortization expense increased to $42.9 million in 1997 from $25.5 million in 1996, or approximately 68%. This increase reflected an increase of approximately 50% in owned aircraft, an approximate two-fold increase in owned spare engines and an increase of approximately 100% in spare parts for 1997 over 1996. In addition, Other Revenues include $1.5 million of depreciation for 1997, associated with the net lease of two owned aircraft which were in passenger configuration. Other operating expenses include salaries, wages and benefits for all employees other than pilots; accounting and legal expenses; supplies; travel and meal expenses, excluding those of the aircraft crews; commissions; and other miscellaneous operating costs. Other operating expenses increased to $49.8 million in 1997 from $27.5 million in 1996, or approximately 81%, reflecting the increase in the Company's operations. On a block hour basis, these expenses increased to 15 16 $661 per block hour in 1997 from $462 per block hour in 1996, or approximately 43%. This increase in cost was due primarily to additional personnel and other resources necessary to properly manage the Company's increased operations and to prepare for the introduction of the 747-400 aircraft. Other income (expense) consists of interest income and interest expense. Interest income for 1997 was $7.4 million compared to $7.1 million for 1996, due to achieving higher interest rates in 1997 compared to 1996 on a slightly lower short-term investment level in 1997 compared to 1996. Interest expense increased to $52.8 million in 1997 from $35.6 million in 1996, or approximately 49%, primarily resulting from an increase of approximately 50% in financed flight equipment between these periods. Income Taxes. Pursuant to the provisions of SFAS No. 109 "Accounting for Income Taxes," the Company has recorded a tax provision based on tax rates in effect during the period. Accordingly, the Company accrued taxes at the rate of 36.5% during 1997 and 1996. Due to significant capital costs, which are depreciated at an accelerated rate for tax purposes, a majority of the Company's tax provision in these periods is deferred. 1996 Compared to 1995 Operating Revenues and Results of Operations. Total operating revenues for the year ended December 31, 1996 increased to $315.7 million compared to $171.3 million for 1995, an increase of approximately 84%. The average number of aircraft in the Company's fleet during 1996 was 14.7, compared to 7.7 during 1995. Total block hours for 1996 were 59,445 compared to 33,265 for 1995, an increase of approximately 79%. Revenue per block hour increased by 3% to $5,310 for 1996 compared to $5,149 for the year-earlier period reflecting a slight increase in the level of charter and scheduled service hours. While charter and scheduled service activity provides a higher revenue rate per block hour, costs are also higher due to fuel and ground handling costs which the Company must bear. The Company's operating results improved from a $42.7 million operating profit for 1995 to an operating profit of $88.1 million for 1996, or approximately 106%. Net income of $17.8 million for 1995 improved to a net income of $37.8 million for 1996, or approximately 112%. Operating levels increased during the first quarter of 1996 as a result of placing in service four additional aircraft. In January 1996, the Company placed in service one aircraft upon completion of its cargo modification by Hong Kong Aircraft Engineering Company. Two additional aircraft were re-delivered to the Company upon completion of their modification by Boeing in March 1996. Finally, at the close of the first quarter, the Company took delivery of the first aircraft sub-leased from FedEx. During the third quarter of 1996, the Company placed in service the next three aircraft sub-leased from FedEx. At the end of the third quarter the Company took delivery of a Boeing 747-200 passenger aircraft acquired from Thai Airways upon completion by Boeing of its modification to cargo configuration. In the fourth quarter of 1996, a second Boeing 747-200 passenger aircraft acquired from Thai Airways was placed in service upon its delivery by Boeing subsequent to modification to cargo configuration. At the end of 1996, two leased aircraft were taken out of service for required maintenance prior to re-delivery to the lessors. The Company's operating levels increased significantly during 1996 as a result of these aircraft acquisitions. Block hours increased from 11,125 in the first quarter of 1996 to 18,803 in the fourth quarter of 1996, relative to the growth in average fleet size from 10.8 aircraft to 18.4 aircraft for the two periods. Total operating revenue increased from $58.6 million in the first quarter to $104.7 million in the fourth quarter, representing slightly higher block hour rates for the fourth quarter compared to those of the first quarter of 1996, primarily due to the seasonality of the business of the Company's customers. The Company achieved $29.9 million operating income and $13.4 million net income in the fourth quarter of 1996, compared to $15.4 million operating income and $6.2 million net income in the first quarter of 1996. The Company's operating levels increased substantially during 1995 also as a result of aircraft acquisitions. Block hours rose from 5,812 hours in the first quarter of 1995 to 10,809 in the fourth quarter, as the average number of aircraft in the Company's fleet grew from 6.1 aircraft to 9.4 aircraft over the corresponding period. Total operating revenue increased from $28.9 million in the first quarter of 1995 to $56.1 million in the fourth quarter, with the Company's operating income increasing from $3.5 million to $16.2 million and its net income improving from $0.1 million to $8.4 million over that same period. For the 16 17 year 1995, total block hours were 33,265 and the average fleet size was 7.7 aircraft. Total operating revenue was $171.3 million, operating income was $42.7 million and net income was $17.8 million. Operating Expenses. Expenses for flight crew salaries and benefits increased to $25.0 million in 1996 from $14.6 million in 1995, primarily as a result of the increase in the Company's fleet of Boeing 747 aircraft from an average of 7.7 aircraft in 1995 to 14.7 aircraft in 1996, while aircraft block hours increased from 33,265 to 59,445, or 79%, over such period. On a block hour basis, this expense declined to $421 per hour for 1996 from $438 per hour for 1995, or approximately 4%, due to increased staffing and scheduling efficiencies associated with increased operations. Other flight-related expenses rose to $27.4 million in 1996 from $12.4 million in 1995, or approximately 120%, primarily due to fleet expansion and higher travel costs associated with operational difficulties related to the aircraft sub-leased from FedEx. On a per block hour basis, other flight-related expenses increased from $372 per block hour in 1995 to $461 per block hour in 1996, or approximately 24%. Maintenance expense increased to $84.3 million in 1996 from $42.6 million in 1995, or approximately 98%, due to the increase in average fleet size and certain increased costs associated with introducing the aircraft sub-leased from FedEx into the Company's fleet and higher ongoing maintenance costs. The aircraft sub-leased from FedEx are not covered by the Company's maintenance contracts with KLM and GE described above. On a block hour basis, maintenance expense increased by 11%, primarily due to parts support requirements associated with scheduled and unscheduled maintenance events, and due to the maintenance costs for the aircraft sub-leased from FedEx discussed above. Aircraft and engine rentals were $27.3 million in 1996 compared to $22.9 million in 1995, representing an increase of 19%. Lease costs in 1996 for the aircraft sub-leased from FedEx represented $9.7 million of this increase, offset by a $2.4 million decrease in sub-service rentals in 1996 compared to 1995. In addition, the lease costs for one aircraft in 1995 exceeded the lease costs in 1996 by $1.6 million, due to the Company's purchase of the aircraft in the second quarter of 1996. Engine rentals decreased by $1.8 million in 1996 to $1.8 million, due to the purchase of eight spare engines which reduced the Company's need for leased engines. Fuel and ground handling costs increased to $10.6 million in 1996 from $5.0 million in 1995, or approximately 110%. This increase was primarily due to an increase in block hours for scheduled service, charters, ferry and other from 1,070 in 1995 to 2,042 in 1996, or approximately 91%. In addition, the airline industry experienced a rise in fuel costs over the period. Depreciation and amortization expense increased to $25.5 million in 1996 from $14.8 million in 1995, reflecting the increase in the number of owned aircraft in the Company's fleet. On a per block hour basis, this expense decreased from $445 per block hour in 1995 to $429 per block hour in 1996, or approximately 4%. The proportion of owned aircraft to leased aircraft was relatively the same for 1996 as it was for 1995. Other operating expenses increased to $27.5 million in 1996 from $16.4 million in 1995, or approximately 68%. On a block hour basis, other operating expenses decreased from $492 per block hour in 1995 to $462 per block hour in 1996, or approximately 6%, reflecting a lower rate of growth in the Company's overhead as compared to its operational growth. Other Income (Expense). Interest income increased to $7.1 million for 1996 from $2.0 million in 1995. This increase was primarily due to the investment of $99.6 million of funds received from the secondary public offering ("SPO") in May 1996, as well as funds retained from the Company's initial public offering ("IPO") in August 1995. Interest expense increased to $35.6 million in 1996 from $18.5 million in 1995, resulting from the increase in financed flight equipment between these periods. Income Taxes. Pursuant to the provisions of SFAS No. 109, "Accounting for Income Taxes," the Company has recorded a tax provision based on tax rates in effect during the period. Accordingly, the Company accrued taxes at the rate of 36.5% in 1996 and 32.0% in 1995. Due to significant capital costs, which are depreciated at an accelerated rate for tax purposes, a majority of the Company's tax provision in 1996 and 1995 is deferred. 17 18 LIQUIDITY AND CAPITAL RESOURCES At December 31, 1997, the Company had cash and cash equivalents of approximately $41.3 million, short-term investments of approximately $111.6 million and working capital of approximately $80.4 million. During 1997, cash and cash equivalents increased approximately $31.5 million, principally reflecting cash provided from operations of $87.7 million, proceeds from equipment financings of $815.8 million and net proceeds from the sale and purchase of short-term investments of $3.2 million, partially offset by the net sale and purchase of investments in flight and other equipment of $364.0 million, principal reductions of indebtedness of $494.1 million, debt issuance costs of $16.6 million and net treasury stock purchases of $0.4 million. At December 31, 1996, the Company had cash and cash equivalents of approximately $9.8 million, short-term investments of approximately $114.9 million and working capital of approximately $98.7 million. During 1996, cash and cash equivalents decreased $87.2 million, principally reflecting investments in flight and other equipment of $289.7 million, the net purchase of $114.9 million of short-term investments, debt issuance costs of $6.0 million, principal reductions of indebtedness of $21.6 million and net treasury stock purchases of $0.5 million, partially offset by cash provided from operations of $84.4 million, proceeds from equipment financings of $154.8 million, net common stock issuances of $106.3 million, including the $99.6 million received from the SPO in the second quarter of 1996. In May 1996, the Company entered into a $175 million revolving credit facility (the "Aircraft Acquisition Credit Facility") with Goldman Sachs Credit Partners L.P. ("Goldman Sachs"), as Syndication Agent, and Bankers Trust Company ("BTCo"), as Administrative Agent. This revolving loan facility provides for the acquisition and conversion of flight equipment. The Aircraft Acquisition Credit Facility was subsequently amended and restated in conjunction with certain refinancings. The Third Amended and Restated Credit Facility provides for a $250 million revolving credit facility as of September 5, 1997 with a two-year revolving period and a subsequent three-year term loan period in the event that permanent financing has not been obtained for any flight equipment financed under the facility. At the time of each borrowing, the Company must select either a Base Rate Loan (prime rate, plus 1.5% through May 8, 1998, thereafter plus 2.0%) or a Eurodollar Rate Loan (Eurodollar rate, plus 2.5% through May 8, 1998, thereafter plus 3.0%). The Eurodollar Rate Loan was selected by the Company for substantially all borrowings in 1996 and 1997. The weighted average interest rate on borrowings outstanding under the Aircraft Acquisition Credit Facility was 8.38% at December 31, 1997. Each borrowing is secured by a first priority security interest in the collateral flight equipment of that borrowing. Certain tests must be met before each purchase of aircraft and related drawdown on the facility. To date, the Company has met these tests. If in the future, the Company cannot meet all the tests because of the difficult sequencing of aircraft acquisition, aircraft conversion and customer contracts, the Company believes that other financing sources would be available to the Company or that it would acquire aircraft using its internal cash or seek a waiver of any necessary conditions. As of December 31, 1997, the Company had $85.0 million outstanding under the Aircraft Acquisition Credit Facility. Covenants with respect to the Aircraft Acquisition Credit Facility require specific levels of insurance, as well as contain requirements regarding possession, maintenance, and lease or transfer of the flight equipment. Certain covenants applicable to the Company include, among other restrictions, limitations on indebtedness, liens, investments, contingent obligations, restricted junior payments, capital expenditures and leases. The Company was in compliance with all of its covenants at December 31, 1997. In March 1997, the Company refinanced one of its aircraft with Nationsbanc Leasing Corporation ("Nationsbanc"). This aircraft was previously financed through the Aircraft Acquisition Credit Facility. As such, this refinancing increased the availability of funds under the Aircraft Acquisition Credit Facility by approximately $25 million. The Nationsbanc financing is a seven year term loan (extendible under certain circumstances to ten years) which provides for a fixed interest rate of 9.16%. The loan is secured by a first priority security interest in this aircraft. In April 1997, the Company purchased the fifth and sixth aircraft from Thai Airways. These aircraft were placed into service in the third quarter of 1997 subsequent to undergoing modification to cargo configuration 18 19 by Boeing. These aircraft were initially financed under the Aircraft Acquisition Credit Facility and were subsequently refinanced as part of the AFL II Term Loan Facility (see below). In May 1997, the Company acquired from Citicorp Investor Lease, Inc. ("Citicorp") one 747-200 passenger aircraft for a purchase price of $25 million, including two spare engines. In connection with the purchase of the aircraft from Citicorp, the Company agreed to assume Citicorp's lessor interest in the lease of such aircraft to Philippine Airlines ("PAL") for the remainder of the lease term. This aircraft is financed under the Aircraft Acquisition Credit Facility. See "-- Recent Developments." In May 1997, the Company formed a wholly-owned subsidiary, Atlas Freighter Leasing, Inc. ("AFL"), for the purpose of entering into the $185 million AFL Term Loan Facility (the "AFL Term Loan Facility") to refinance six Boeing 747-200 aircraft previously financed through Internationale Nederlanden Aviation Lease B.V. ("ING Bank"). Concurrent with entering into the AFL Term Loan Facility, the proceeds of the AFL Term Loan Facility were used to repay all existing principal and interest due under the ING Bank debt. Interest is based on the Eurodollar rate, plus 2.5% for the first three years and 3.0% thereafter, and is payable quarterly. The interest rate on borrowings outstanding under the AFL Term Loan Facility was 8.38% at December 31, 1997. Quarterly scheduled principal payments of $2.5 million commenced in February 1998 and increase to $5.7 million in August 1998 with a final payment of $50.0 million in May 2004. The AFL Term Loan Facility is secured by a first priority interest in the six subject aircraft and is restrictive with respect to limitations on indebtedness, liens, investments, contingent obligations, restricted junior payments, capital expenditures, amendments of material agreements, leases, transactions with shareholders and affiliates and the conduct of business. AFL was in compliance with all of its covenants as of December 31, 1997. In June 1997, the Company entered into the Boeing Purchase Agreement to purchase 10 new 747-400 freighter aircraft to be powered by GE engines. The 747-400 freighter aircraft are currently scheduled to be delivered as follows: five in 1998, two in 1999 and three in 2000. Due to production problems at Boeing, the Company believes that each of the 1998 delivery positions of the 747-400 aircraft may be delayed up to 60 days. While Boeing will compensate the Company for defined delays in delivery of the 747-400 aircraft, any such delays may adversely impact the Company's ability to initiate service with prospective customers in a timely fashion. The Boeing Purchase Agreement also provides the Company with options to purchase up to 10 additional 747-400 freighter aircraft for delivery from 1999 through 2002. As a result of the Company being the largest purchaser of 747-400 freighter aircraft to date, it was able to negotiate from Boeing and GE a significant discount off the aggregate list price of $1.7 billion for the 10 747-400 freighter aircraft, four installed engines per aircraft and five spare engines. In addition, the Company also obtained certain ancillary products and services at advantageous prices. The Boeing Purchase Agreement requires that the Company pay Pre-Delivery Deposits to Boeing prior to the delivery date of each 747-400 freighter aircraft in order to secure delivery of the 747-400 freighter aircraft and to defray a portion of the manufacturing costs. The Company expects the maximum total amount of Pre-Delivery Deposits at any time outstanding will be approximately $155 million, approximately $105.1 million of which was paid as of December 31, 1997. For the years 1998 and 1999, the Company expects to pay $67.6 million and $42.6 million, respectively, in accordance with the Pre-Delivery Deposits schedule. In addition, the Boeing Purchase Agreement provides for a deferral of a portion of the Pre-Delivery Deposits (Deferred Aircraft Obligations) for which the Company accrues and pays interest quarterly at 6-month LIBOR, plus 2.00%. As of December 31, 1997, there was $163.2 million of Deferred Aircraft Obligations outstanding and the combined interest rate was 7.97%. In August 1997, the Company completed the offering of its unsecured 10 3/4% Senior Notes due 2005 ("Senior Notes"). The proceeds from the offering of the Senior Notes were used to, among other things, repay short-term indebtedness incurred by the Company to make pre-delivery deposits to Boeing for the purchase of 10 new freighter aircraft and for additional pre-delivery deposits as they become due. Interest on the Senior Notes began to accrue from their date of original issuance and is payable semi-annually in arrears on February 1 and August 1 of each year, commencing February 1, 1998, at the rate of 10 3/4% per annum. The Senior Notes are redeemable, in whole or in part, at the option of the Company, on or after August 1, 2001, at established redemption prices, plus accrued interest to the date of redemption. In addition, at any time on or prior to August 1, 2000, the Company, at its option, may redeem up to 35% of the aggregate principal amount of the Senior Notes originally issued with the net cash proceeds of one or more public equity offerings, at a 19 20 redemption price equal to 110.75% of the principal amount thereof plus accrued interest to the date of redemption; provided that at least 65% of the aggregate principal amount of the Senior Notes originally issued remains outstanding immediately after any such redemption. The Senior Notes are general unsecured obligations of the Company which rank pari passu in right of payment to any existing and future unsecured senior indebtedness of the Company. The Senior Notes are effectively subordinated, however, to all secured indebtedness of the Company and to all indebtedness of the Company's subsidiaries. Covenants with respect to the Senior Notes contain certain limitations on the ability of the Company and its subsidiaries to, among other things, incur additional indebtedness, pay dividends or make certain other restricted payments, consummate certain asset sales, enter into certain transactions with affiliates, incur liens, create restrictions on the ability of a subsidiary to pay dividends or make certain payments, sell or issue preferred stock of subsidiaries to third parties, merge or consolidate with any other person or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the assets of the Company. The Company was in compliance with all of its covenants as of December 31, 1997. In September 1997, the Company formed another wholly-owned subsidiary, Atlas Freighter Leasing II, Inc. ("AFL II") for the purpose of entering into the $185 million AFL II Term Loan Facility (the "AFL II Term Loan Facility") to refinance four of the aircraft previously financed under the Aircraft Acquisition Credit Facility, plus nine spare engines, in order to provide the Company with greater financial flexibility in anticipation of the financing requirements for the future acquisition of additional freighter aircraft. Interest is based on the Eurodollar rate, plus 2.25%, less a pricing reduction, if any, in effect from time to time, and is payable quarterly. The interest rate on borrowings outstanding under the AFL II Term Loan Facility was 8.13% at December 31, 1997. Quarterly scheduled principal payments of $2.5 million commenced in February 1998 and increase to $5.7 million in August 1998 with a final payment of $50.0 million in May 2004. The AFL II Term Loan Facility is secured by a first priority interest in the four subject aircraft, plus nine spare engines, and is restrictive with respect to limitations on indebtedness, liens, investments, contingent obligations, restricted junior payments, capital expenditures, amendments of material agreements, leases, transactions with shareholders and affiliates and the conduct of business. AFL II was in compliance with all of its covenants as of December 31, 1997. In October 1997, Atlas Flightlease, Inc. ("AFI"), a wholly-owned subsidiary of the Company, secured a 2-year LIBOR based financing with Bankers Trust Company for approximately 80% of the purchase price of a 1988 Canadair Challenger passenger aircraft (the "Challenger"). AFI purchased the Challenger from MAC Flightlease, Inc. ("MAC Flightlease"), an entity wholly-owned by the wife of the Company's Chairman, President and CEO (see Note 7 to the Consolidated Financial Statements), in the third quarter of 1997. In December 1997, AFI refinanced the Challenger for approximately 100% of its purchase price with Nationsbanc under a 5-year loan which was guaranteed by the Company. Interest is based on the Eurodollar rate, plus 2.35%, and is payable quarterly with concurrent scheduled payments of principal. The interest rate on borrowings outstanding under the Nationsbanc debt was 8.26% at December 31, 1997. The loan is secured by a first priority security interest in the Challenger. Covenants with respect to this financing require specific levels of insurance, as well as contain requirements regarding use, maintenance, configuration, liens and disposition of the Challenger, among other things. AFI was in compliance with all of its covenants as of December 31, 1997. Due to the contractual nature of the Company's business, the Company's management does not consider its operations to be highly working capital-intensive in nature. Because most of the non-ACMI costs normally associated with operations are borne by and directly paid for by the Company's customers, the Company does not incur significant costs in advance of the receipt of corresponding revenues. Moreover, ACMI costs, which are the responsibility of the Company, are generally incurred on a regular, periodic basis ranging from flight hours to months. These costs are largely matched by revenue receipts, as the Company's contracts require regular payments from its customers, based upon current flight activity, generally every two to four weeks. As a result, the Company has not in the past had a requirement for a working capital facility. The Company is exploring the possibility of entering into an unsecured line of credit for general working capital purposes. Under the FAA's Directives issued under its Aging Aircraft program, the Company is subject to extensive aircraft examinations and may be required to undertake structural modifications to address the 20 21 problem of corrosion and structural fatigue. In November 1994, Boeing issued Nacelle Strut Modification Service Bulletins which have been converted into Directives by the FAA. Twelve of the Company's Boeing 747-200 aircraft will have to be brought into compliance with such Directives within the next three years at an estimated cost of approximately $6.0 million. As part of the FAA's overall aging aircraft program, it has issued Directives requiring certain additional aircraft modifications to be accomplished prior to the aircraft reaching 20,000 cycles. The average cycle time for the 17 aircraft in service is approximately 12,000 cycles and the average cycles operated per year is approximately 800 cycles. The Company estimates that the modification costs per aircraft will range between $2 million and $3 million. Between now and the year 2000, only one aircraft is expected to reach the 20,000 cycle limit and nine additional aircraft will require modification prior to 2009. The remaining seven aircraft in service have already undergone such modifications. The two aircraft undergoing modification to freighter configuration will receive the Nacelle Strut Modification as part of the freighter conversion. Other Directives have been issued that require inspections and minor modifications to Boeing 747-200 aircraft. It is possible that additional Directives applicable to the types of aircraft or engines included in the Company's fleet could be issued in the future, the cost of which could be substantial. Upon acquisition of an aircraft, the Company determines whether or not the aircraft is in compliance with Airworthiness Directives and tries to anticipate all future compliance requirements. The necessary work to bring the aircraft into compliance is then scheduled at the time of conversion of the aircraft to freighter configuration, in order to minimize unscheduled maintenance events. The Company has initiated a review of its internal information systems for any Year 2000 transition problems through a company-wide effort, assisted by Year 2000 experienced consultants, to address internal Year 2000 system issues, and jointly with industry trade groups, to address issues related to key business partners which are common to other air carriers. The Company has not completed the development of the remediation approach for all affected areas. As a result, the Company cannot estimate what the total cost will be to implement remediation efforts for all critical operational systems. However, due to the Company's relatively young systems, the Company's advanced client server and data base architecture, and the Company's partial reliance on vendor representations regarding Year 2000 compliant third-party systems, the Company is confident that such remediation efforts will not be material. The Company expects to complete the assessment and development stages of this plan by mid-1998, at which time it expects to be able to make a reasonable cost estimate. Implementation of all remediation efforts is scheduled to be completed in early 1999. The Company has started an ongoing program to review the status of key supplier Year 2000 compliance efforts. While the Company believes it is taking all appropriate steps to assure Year 2000 compliance, it is dependent on key business partner compliance to some extent. The Year 2000 problem is pervasive and complex, as virtually every computer operation will be affected in some way. Consequently, no assurance can be given that Year 2000 compliance can be achieved without costs that might affect future financial results or cause reported financial information not to be necessarily indicative of future operating results or future financial condition. From time to time the Company engages in discussions with third parties regarding possible acquisitions of aircraft that could expand the Company's operations. The Company is in discussions with third parties for the possible acquisition of additional aircraft for delivery in 1998 and beyond. RECENT DEVELOPMENTS In January and February 1998, pursuant to an early lease termination agreement negotiated in November 1997, the Company delivered to Boeing for modification to cargo configuration the aircraft acquired from Marine Midland in December 1996 and the aircraft acquired from Citicorp in May 1997. These aircraft are expected to be re-delivered to the Company in the second quarter and early in the third quarter of 1998, respectively. The financing for the modification to cargo configuration is secured under the Aircraft Acquisition Credit Facility. In February 1998, the Company completed an offering of $538.9 million of pass-through certificates, also known as enhanced equipment trust certificates (the "EETCs"). The EETCs are not direct obligations of, or guaranteed by, the Company and therefore will not be included in the Company's consolidated financial 21 22 statements. The cash proceeds from the transaction were deposited with an escrow agent and will be used to finance (through either leveraged leases or secured debt financings) the debt portion of the acquisition cost of five of the 10 new 747-400 freighter aircraft from Boeing scheduled to be delivered to the Company during the period July 1998 through December 1998. In connection therewith, the Company intends to seek certain owner participants who will commit lease equity financing to be used in leveraged leases of such aircraft. If any funds remain as deposits with the escrow agent for such EETCs at the end of the delivery period, such funds will be distributed back to the certificateholders. Such distribution will include a make-whole premium payable by the Company. In November and December 1997, the Company entered into three Treasury Note hedges, approximating $300 million of principal, for the purpose of minimizing the risk associated with the fluctuations in interest rates, which are the basis for the pricing of the EETCs which were priced in January 1998. The effect of the hedge resulted in a deferred cost of $6.3 million, which will be amortized over the expected twenty-year life associated with this financing. There can be no assurance that the Company will be able to obtain sufficient financing to fund the purchase of the remaining five 747-400 freighter aircraft, or if such financing is available, that it will be available on a commercially reasonable basis. If it is unable to do so, the Company could be required to modify its expansion plans or to incur higher than anticipated financing costs, which could have a material adverse effect on the Company. The Company is currently negotiating for the possibility of refinancing two aircraft in the amount of approximately $86 million, currently financed under the Aircraft Acquisition Credit Facility. There is no assurance that this refinancing will be consummated. The Company believes that cash on hand, the cash flow generated from its operations and the proceeds from the May 1996 SPO and the August 1997 placement of the Senior Notes, coupled with availability under the Aircraft Acquisition Credit Facility and the proceeds of the EETCs, will be sufficient to meet its normal ongoing liquidity needs for 1998. RECENTLY ISSUED ACCOUNTING STANDARDS In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings per Share," effective for financial statements for both interim and annual periods ending after December 15, 1997. The purpose of SFAS No. 128 is to simplify the computation of earnings per share ("EPS") and to make the U.S. standard for computing EPS more compatible with the EPS standards of other countries and with that of the International Accounting Standards Committee. SFAS No. 128 requires the dual presentation of basic earnings per share ("basic EPS"), which replaces primary earnings per share, and diluted earnings per share ("diluted EPS"). Basic EPS is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted EPS is computed similar to basic EPS except that the weighted-average number of common shares outstanding during the period is adjusted for the incremental shares attributed to outstanding options to purchase common stock. In June 1997, the Financial Accounting Standards Board issued SFAS No. 130 "Reporting Comprehensive Income," which establishes standards for reporting and display of comprehensive income and its components in a full set of general purpose financial statements. The objective of SFAS No. 130 is to report a measure of all changes in equity of an enterprise that result from transactions and other economic events of the period other than transactions with owners. Comprehensive income includes net income plus other comprehensive income (other revenues, expenses, gains, and losses that under generally accepted accounting principles bypass net income). The Company does not expect other comprehensive income to be material. The effective date for the application of SFAS No. 130 for both interim and annual periods is for fiscal years beginning after December 15, 1997 with earlier application permitted. FORWARD-LOOKING STATEMENTS To the extent that any of the statements contained herein relating to the Company's expectations, assumptions and other Company matters are forward-looking, such statements are based on current 22 23 expectations that involve a number of uncertainties and risks that could cause actual results to differ materially from those projected in the forward-looking statements, including, but not limited to, risks associated with: worldwide business and economic conditions; product demand and the rate of growth in the air cargo industry; the impact of competitors and competitive aircraft and aircraft financing availability; the ability to attract and retain new and existing customers; normalized aircraft operating costs and reliability; management of growth; the continued productivity of its workforce; dependence on key personnel; and regulatory matters. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Consolidated Financial Statements and schedules that constitute Item 8 follow the text of this report. An index to the Consolidated Financial Statements appears in Item 14(a) of this report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III Certain information required by Part III is omitted from this report since the Registrant will file a definitive Proxy Statement pursuant to Regulation 14A (the "Proxy Statement") not later than 120 days after the end of the year covered by this report, and certain information included therein is incorporated herein by reference. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information concerning the Company's executive officers and directors required by this Item is incorporated by reference from the Proxy Statement. ITEM 11. EXECUTIVE COMPENSATION. The information required by this Item is incorporated by reference from the Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required by this Item is incorporated by reference from the Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information required by this Item is incorporated by reference from the Proxy Statement. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (A)(1) FINANCIAL STATEMENTS Index to Consolidated Financial Statements.................. F-1 Report of Independent Public Accountants.................... F-2 Consolidated Balance Sheets................................. F-3 Consolidated Statements of Operations....................... F-4 Consolidated Statements of Stockholders' Equity (Deficit)... F-5 Consolidated Statements of Cash Flows....................... F-6 Notes to Consolidated Financial Statements.................. F-7
(A)(2) FINANCIAL STATEMENT SCHEDULES None required. 23 24 (A)(3) LIST OF EXHIBITS.
EXHIBIT NUMBER DESCRIPTION ------- ----------- +2.1 -- Plan of Reorganization and Merger Agreement dated as of July 12, 1995 by and between Holdings and the Company. +3.2 -- Restated Certificate of Incorporation of the Company. +3.3 -- Amended and Restated By-Laws of the Company. ++4.1 -- Form of Indenture between the Company and First Fidelity Bank, N.A., as Trustee. ++4.2 -- Form of Second Indenture between the Company and First Fidelity Bank, N.A., as Trustee. ++4.3 -- Form of Pass Through Trust Agreement between the Company and First Fidelity Bank, N.A., as Trustee (with form of Pass Through Certificate attached as exhibit thereto). ++4.4 -- Form of Pass Through Agreement between the Company and First Fidelity Bank, N.A., as Trustee (with form of Pass Through Certificate attached as exhibit thereto). +10.14 -- Boeing 747 Maintenance Agreement dated January 1, 1995, between the Company and KLM Royal Dutch Airlines, as amended. +10.15 -- Atlas Air, Inc. 1995 Long Term Incentive and Stock Award Plan. +10.16 -- Atlas Air, Inc. Employee Stock Purchase Plan. +10.17 -- Atlas Air, Inc. Profit Sharing Plan. +10.18 -- Atlas Air, Inc. Retirement Plan. ++10.19 -- Employment Agreement between the Company and Michael A. Chowdry. ++10.20 -- Employment Agreement between the Company and Richard H. Shuyler. ++10.23 -- Employment Agreement between the Company and James T. Matheny. +10.26 -- Maintenance Agreement between the Company and Hong Kong Aircraft Engineering Company Limited dated April 12, 1995, for the performance of certain maintenance events. +10.30 -- Conditional Sales Agreement dated as of September 22, 1994 by and between Lufthansa and the Company relating to B747-230 aircraft, registration D-ABYS. +10.31 -- Conditional Sales Agreement dated as of September 22, 1994 by and between Lufthansa and the Company relating to B747-230 aircraft, registration D-ABYL. *10.36 -- Aircraft Purchase Agreement, dated as of January 19, 1996 between Langdon Asset Management, Inc. and the Company. ***10.52 -- Employment Agreement dated as of November 18, 1996 between the Company and R. Terrence Rendlerman. ***10.53 -- Secured Loan Agreement by and between the Company and Finova Capital Corporation dated April 11, 1996. ***10.54 -- Second Amended and Restated Credit Agreement among the Company and the Lenders listed therein, Goldman Sachs Credit Partners L.P. (as syndication agent) and Bankers Trust Company (as Administrative Agent) dated February 28, 1997. ***/****10.55 -- Engine Maintenance Agreement between the Company and General Electric Company dated June 6, 1996. **10.56 -- Employment Agreement dated as of May 1, 1997 between the Company and Stanley G. Wraight.
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EXHIBIT NUMBER DESCRIPTION ------- ----------- **10.58 -- Third Amended and Restated Credit Agreement among the Company, the Lenders listed therein, Goldman Sachs Credit Partners L.P. (as Syndication Agent) and Bankers Trust Company (as Administrative Agent) dated September 5, 1997. **10.59 -- Credit Agreement among Atlas Freighter Leasing, Inc., the Lenders listed therein and Bankers Trust Company, as agent, dated May 29, 1997. **10.60 -- Lease Agreement between Atlas Freighter Leasing, Inc., as lessor, and the Company, as lessee, relating to B747-200 aircraft. U.S. Registration No. N516MC. **10.61 -- Lease Agreement between Atlas Freighter Leasing, Inc., as lessor, and the Company, as lessee, relating to B747-200 aircraft. U.S. Registration No. N508MC. **10.62 -- Lease Agreement between Atlas Freighter Leasing, Inc., as lessor, and the Company, as lessee relating to B747-200 aircraft. U.S. Registration No. N507MC. **10.63 -- Lease Agreement between Atlas Freighter Leasing, Inc., as lessor, and the Company, as lessee, relating to B747-200 aircraft. U.S. Registration No. N509MC. **10.64 -- Lease Agreement between Atlas Freighter Leasing, Inc., as lessor, and the Company, as lessee, relating to B747-200 aircraft. U.S. Registration No. N808MC. **10.65 -- Lease Agreement between Atlas Freighter Leasing Inc., as lessor, and the Company, as lessee, relating to B747-200 aircraft. U.S. Registration No. N505MC. **10.66 -- Security Agreement and Chattel Mortgage between the Company, Atlas Freighter Leasing, Inc. and Bankers Trust Company, as agent, relating to B747-200 aircraft. U.S. Registration No. N808MC. **10.67 -- Security Agreement and Chattel Mortgage between the Company, Atlas Freighter Leasing, Inc. and Bankers Trust Company, as agent relating to B747-200 aircraft U.S. Registration No. N507MC. **10.68 -- Security Agreement and Chattel Mortgage between the Company, Atlas Freighter Leasing, Inc. and Bankers Trust Company, as agent, relating to B747-200 aircraft. U.S. Registration No. N509MC. **10.69 -- Security Agreement and Chattel Mortgage between the Company, Atlas Freighter Leasing, Inc. and Bankers Trust Company, as agent, relating to B747-200 aircraft. U.S. Registration No. N505MC. **10.70 -- Security Agreement and Chattel Mortgage between the Company, Atlas Freighter Leasing, Inc. and Bankers Trust Company, as agent, relating to B747-200 aircraft. U.S. Registration No. N508MC. **10.71 -- Security Agreement and Chattel Mortgage between the Company, Atlas Freighter Leasing, Inc. and Bankers Trust Company, as agent, relating to B747-200 aircraft. U.S. Registration No. N516MC. **10.72 -- Form of Indenture, dated August 13, 1997, between the Company and State Street Bank and Trust Company, as Trustee, relating to the 10 3/4% Senior Notes (with form of Note attached as exhibit thereto). **10.73 -- Purchase Agreement, dated August 8, 1997, between the Company and BT Securities Corporation relating to the 10 3/4% Senior Notes. **10.74 -- Registration Rights Agreement, dated August 13, 1997, between the Company and BT Securities Corporation relating to the 10 3/4% Senior Notes. **10.75 -- Credit Agreement among Atlas Freighter Leasing II, Inc., the Lenders listed therein, Bankers Trust Company (as Administrative Agent) and Goldman Sachs Credit Partners L.P. (as Syndication Agent) dated September 5, 1997.
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EXHIBIT NUMBER DESCRIPTION ------- ----------- **10.76 -- Lease Agreement dated September 5, 1997 between Atlas Freighter Leasing II, Inc., as lessor, and the Company, as lessee, relating to B747-200 aircraft, U.S. Registration No. N527MC and Spare Engine Nos. 517538, 517539 and 455167. **10.77 -- Lease Agreement dated September 5, 1997 between Atlas Freighter Leasing II, Inc., as lessor, and the Company, as lessee, relating to B747-200 aircraft, U.S. Registration No. N523MC and Spare Engine Nos. 530168 and 517530. **10.78 -- Lease Agreement dated September 5, 1997 between Atlas Freighter Leasing II, Inc., as lessor, and the Company, as lessee, relating to B747-200 aircraft, U.S. Registration No. N524MC and Spare Engine Nos. 517790 and 517602. **10.79 -- Lease Agreement dated September 5, 1997 between Atlas Freighter Leasing II, Inc., as lessor, and the Company, as lessee, relating to B747-200 aircraft, U.S. Registration No. N526MC and Spare Engine Nos. 517544 and 517547. **10.80 -- Security Agreement and Chattel Mortgage dated September 5, 1997 between Atlas Freighter Leasing II, Inc., the Company and Bankers Trust Company, as Agent, relating to B747-200 aircraft, U.S. Registration No. N523MC and Spare Engine Nos. 530168 and 517530. **10.81 -- Security Agreement and Chattel Mortgage dated September 5, 1997 between Atlas Freighter Leasing II, Inc., the Company and Bankers Trust Company, as Agent, relating to B747-200 aircraft, U.S. Registration No. N524MC and Spare Engine Nos. 517790 and 517602. **10.82 -- Security Agreement and Chattel Mortgage dated September 5, 1997 between Atlas Freighter Leasing II, Inc., the Company and Bankers Trust Company, as Agent, relating to B747-200 aircraft, U.S. Registration No. N526MC and Spare Engine Nos. 517544 and 517547. **10.84 -- Security Agreement and Chattel Mortgage dated September 5, 1997 between Atlas Freighter Leasing II, Inc., the Company and Bankers Trust Company, as Agent, relating to B747-200 aircraft, U.S. Registration No. N527MC and Spare Engine Nos. 517538, 517539 and 455167. **10.85 -- First Amendment to Lease Agreement among Atlas Freighter Leasing, Inc. and Bankers Trust Company, as agent, dated September 5, 1997. **/****10.86 -- Purchase Agreement Number 2021 between The Boeing Company and the Company dated June 6, 1997. **10.87 -- Aircraft General Terms Agreement between The Boeing Company and the Company dated June 6, 1997. 10.88 -- Placement Agreement, dated January 26, 1998, among the Company, Morgan Stanley & Co. Incorporated, BT Alex. Brown Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co. relating to the Pass Through Certificates Series 1998-1. 10.89 -- Registration Rights Agreement, dated February 9, 1998, among the Company, Morgan Stanley & Co. Incorporated, BT Alex. Brown Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co. relating to the Pass Through Certificates Series 1998-1. 10.90 -- Pass Through Trust Agreement, dated as of February 9, 1998, between the Company and Wilmington Trust Company, as Trustee, relating to the Atlas Air Pass Through Trust 1998-1A-0.
26 27
EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.91 -- Pass Through Trust Agreement, dated as of February 9, 1998, between the Company and Wilmington Trust Company, as Trustee, relating to the Atlas Air Pass Through Trust 1998-1A-S. 10.92 -- Pass Through Trust Agreement, dated as of February 9, 1998, between the Company and Wilmington Trust Company, as Trustee, relating to the Atlas Air Pass Through Trust 1998-1B-0. 10.93 -- Pass Through Trust Agreement, dated as of February 9, 1998, between the Company and Wilmington Trust Company, as Trustee, relating to the Atlas Air Pass Through Trust 1998-1B-S. 10.94 -- Pass Through Trust Agreement, dated as of February 9, 1998, between the Company and Wilmington Trust Company, as Trustee, relating to the Atlas Air Pass Through Trust 1998-1C-0. 10.95 -- Pass Through Trust Agreement, dated as of February 9, 1998, between the Company and Wilmington Trust Company, as Trustee, relating to the Atlas Air Pass Through Trust 1998-1C-S. 10.96 -- Deposit Agreement (Class A), dated as of February 9, 1998, between First Security Bank, National Association, as Escrow Agent, and ABN AMRO Bank N.V., acting through its Chicago Branch, as Depositary. 10.97 -- Deposit Agreement (Class B), dated as of February 9, 1998, between First Security Bank, National Association, as Escrow Agent, and ABN AMRO Bank N.V., acting through its Chicago Branch, as Depositary 10.98 -- Deposit Agreement (Class C), dated as of February 9, 1998, between First Security Bank, National Association, as Escrow Agent, and ABN AMRO Bank N.V., acting through its Chicago Branch, as Depositary 10.99 -- Indemnity Agreement, dated as of February 9, 1998, between ABN AMRO Bank N.V., acting through its Chicago Branch, as Depositary, and the Company. 10.100 -- Escrow and Paying Agent Agreement (Class A), dated as of February 9, 1998, among First Security Bank, National Association, as Escrow Agent, Morgan Stanley & Co. Incorporated, BT Alex. Brown Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co., as Placement Agents, Wilmington Trust Company, not in its individual capacity, but solely as Pass Through Trustee, and Wilmington Trust Company, as Paying Agent. 10.101 -- Escrow and Paying Agent Agreement (Class B), dated as of February 9, 1998, among First Security Bank, National Association, as Escrow Agent, Morgan Stanley & Co. Incorporated, BT Alex. Brown Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co., as Placement Agents, Wilmington Trust Company, not in its individual capacity, but solely as Pass Through Trustee, and Wilmington Trust Company, as Paying Agent. 10.102 -- Escrow and Paying Agent Agreement (Class C), dated as of February 9, 1998, among First Security Bank, National Association, as Escrow Agent, Morgan Stanley & Co. Incorporated, BT Alex. Brown Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co., as Placement Agents, Wilmington Trust Company, not in its individual capacity, but solely as Pass Through Trustee, and Wilmington Trust Company, as Paying Agent. 10.103 -- Revolving Credit Agreement (1998-1A), dated as of February 9, 1998, between Wilmington Trust Company, not in its individual capacity but solely as Subordination Agent, as Borrower, and ABN AMRO Bank N.V., acting through its Chicago Branch as Liquidity Provider.
27 28
EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.104 -- Revolving Credit Agreement (1998-1B), dated as of February 9, 1998, between Wilmington Trust Company, not in its individual capacity but solely as Subordination Agent, as Borrower, and Morgan Stanley Capital Services, Inc., as Liquidity Provider. 10.105 -- Revolving Credit Agreement (1998-1C), dated as of February 9, 1998, between Wilmington Trust Company, not in its individual capacity but solely as Subordination Agent, as Borrower, and Morgan Stanley Capital Services, Inc., as Liquidity Provider. 10.106 -- Guarantee, dated as of February 9, 1998, from Morgan Stanley, Dean Witter, Discover & Co. to Atlas Air, Inc. Pass Through Trust 1998-B relating to Class B Liquidity Facility. 10.107 -- Guarantee, dated as of February 9, 1998, from Morgan Stanley, Dean Witter, Discover & Co. to Atlas Air, Inc. Pass Through Trust 1998-C relating to Class C Liquidity Facility. 10.108 -- Intercreditor Agreement, dated as of February 9, 1998, among Wilmington Trust Company, not in its individual capacity but solely as Trustee, ABN AMRO Bank N.V., acting through its Chicago Branch, as Class A Liquidity Provider, Morgan Stanley Capital Services, Inc., as Class B Liquidity Provider and Class C Liquidity Provider, and Wilmington Trust Company. 10.109 -- Note Purchase Agreement, dated as of February 9, 1998, among the Company, Wilmington Trust Company and First Security Bank, National Association. 10.110 -- Employment Agreement dated as of February 16, 1998 between the Company and Stephen C. Nevin. 21.1 -- Subsidiaries of the Registrant. 27 -- Financial Data Schedule.
- --------------- + Incorporated by reference to the exhibits to the Company's Registration Statement on Form S-1 (No. 33-90304). ++ Incorporated by reference to the exhibits to the Company's Registration Statement on Form S-1 (No. 33-97892). * Incorporated by reference to the exhibits to the Company's Registration Statement on Form S-1 (No. 333-2810). ** Incorporated by reference to the exhibits to the Company's Registration Statement on Form S-4 (No. 333-36305). *** Incorporated by reference to the exhibits to the Company's Annual Report for 1996 on Form 10-K. **** Portions of this document, for which the Company has been granted confidential treatment, have been redacted and filed separately with the Securities and Exchange Commission. (B) REPORTS ON FORM 8-K No reports on Form 8-K have been filed during the last quarter of the period covered by this report. 28 29 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 27th day of March, 1998. ATLAS AIR, INC. By: /s/ STEPHEN C. NEVIN ---------------------------------- Stephen C. Nevin Vice President-Finance, Chief Financial Officer Principal Accounting Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ MICHAEL A. CHOWDRY Chairman of the Board of March 27, 1998 - ----------------------------------------------------- Directors, Chief Executive Michael A. Chowdry Officer and President /s/ RICHARD H. SHUYLER Executive Vice President -- March 27, 1998 - ----------------------------------------------------- Strategic Planning, Treasurer Richard H. Shuyler and Director /s/ BERL BERNHARD Director March 27, 1998 - ----------------------------------------------------- Berl Bernhard /s/ LAWRENCE W. CLARKSON Director March 27, 1998 - ----------------------------------------------------- Lawrence W. Clarkson /s/ DAVID T. MCLAUGHLIN Director March 27, 1998 - ----------------------------------------------------- David T. McLaughlin /s/ BRIAN ROWE Director March 27, 1998 - ----------------------------------------------------- Brian Rowe
29 30 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- Report of Independent Public Accountants.................... F-2 Consolidated Balance Sheets as of December 31, 1997 and December 31, 1996......................................... F-3 Consolidated Statements of Operations for the years ended December 31, 1997, 1996 and 1995.......................... F-4 Consolidated Statements of Stockholders' Equity (Deficit) for the years ended December 31, 1997, 1996 and 1995...... F-5 Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995.......................... F-6 Notes to Consolidated Financial Statements.................. F-7
F-1 31 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Atlas Air, Inc.: We have audited the accompanying consolidated balance sheets of Atlas Air, Inc. (a Delaware corporation) and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of operations, stockholders' equity (deficit) and cash flows for each of the three years in the period ended December 31, 1997. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Atlas Air, Inc. and subsidiaries as of December 31, 1997 and 1996, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Denver, Colorado February 13, 1998. F-2 32 ATLAS AIR, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA) ASSETS
DECEMBER 31, ---------------------- 1997 1996 ---------- -------- Current assets: Cash and cash equivalents................................. $ 41,334 $ 9,793 Short-term investments.................................... 111,635 114,870 Accounts receivable and other, net........................ 55,702 49,603 ---------- -------- Total current assets.............................. 208,671 174,266 Property and equipment: Flight equipment.......................................... 1,154,562 638,630 Other..................................................... 7,607 3,933 ---------- -------- 1,162,169 642,563 Less accumulated depreciation............................. (98,959) (58,293) Net property and equipment........................ 1,063,210 584,270 Other assets: Debt issuance costs, net of accumulated amortization...... 21,705 12,382 Deposits.................................................. 3,829 2,789 ---------- -------- 25,534 15,171 ---------- -------- Total assets...................................... $1,297,415 $773,707 ========== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt......................... $ 40,049 $ 21,561 Accounts payable and accrued expenses..................... 88,105 47,763 Income tax payable........................................ 154 6,267 ---------- -------- Total current liabilities......................... 128,308 75,591 Long-term debt, net of current portion...................... 736,026 462,868 Deferred aircraft obligations............................... 163,167 -- Deferred income tax payable................................. 31,085 19,463 Commitments and contingencies Stockholders' equity: Preferred Stock, $1 par value; 10,000,000 shares authorized; no shares issued........................... -- -- Common Stock, $0.01 par value; 50,000,000 shares authorized; 22,450,229 shares issued................... 225 225 Additional paid-in capital................................ 176,253 176,253 Retained earnings......................................... 62,803 39,543 Treasury Stock, at cost; 19,073 and 5,850 shares, respectively........................................... (452) (236) ---------- -------- Total stockholders' equity........................ 238,829 215,785 ---------- -------- Total liabilities and stockholders' equity........ $1,297,415 $773,707 ========== ========
The accompanying notes are an integral part of these consolidated financial statements. F-3 33 ATLAS AIR, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31, -------------------------------- 1997 1996 1995 -------- -------- -------- Revenues: Contract services........................................ $383,824 $296,289 $166,070 Scheduled services....................................... 7,171 6,005 1,335 Charters and other....................................... 10,046 13,365 3,862 -------- -------- -------- Total operating revenues......................... 401,041 315,659 171,267 Operating expenses: Flight crew salaries and benefits........................ 30,153 25,020 14,584 Other flight-related expenses............................ 28,784 27,404 12,361 Maintenance.............................................. 123,820 84,305 42,574 Aircraft and engine rentals.............................. 31,644 27,341 22,902 Fuel and ground handling................................. 10,816 10,554 5,027 Depreciation and amortization............................ 42,945 25,515 14,793 Other.................................................... 49,777 27,457 16,352 Write-off of capital investment and other................ 27,100 -- -- -------- -------- -------- Total operating expenses......................... 345,039 227,596 128,593 Operating income........................................... 56,002 88,063 42,674 Other income (expense): Interest income.......................................... 7,365 7,102 2,025 Interest expense......................................... (52,834) (35,577) (18,460) -------- -------- -------- (45,469) (28,475) (16,435) -------- -------- -------- Income before income taxes................................. 10,533 59,588 26,239 Provision for income taxes................................. (3,844) (21,750) (8,408) -------- -------- -------- Income before extraordinary item........................... 6,689 37,838 17,831 Extraordinary item: Gain from extinguishment of debt, net of applicable taxes of $9,622............................................. 16,740 -- -- -------- -------- -------- Net income....................................... $ 23,429 $ 37,838 $ 17,831 ======== ======== ======== Basic earnings per share: Income before extraordinary item......................... $ .30 $ 1.76 $ 1.06 Extraordinary item....................................... .74 -- -- -------- -------- -------- Net income............................................... $ 1.04 $ 1.76 $ 1.06 ======== ======== ======== Weighted average common shares........................... 22,450 21,503 16,783 ======== ======== ======== Diluted earnings per share: Income before extraordinary item......................... $ .30 $ 1.75 $ 1.06 Extraordinary item....................................... .74 -- -- -------- -------- -------- Net income............................................... $ 1.04 $ 1.75 $ 1.06 ======== ======== ======== Weighted average common shares........................... 22,536 21,682 16,852 ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements. F-4 34 ATLAS AIR, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (IN THOUSANDS)
TOTAL COMMON STOCK ADDITIONAL RETAINED STOCKHOLDERS' --------------- PAID-IN EARNINGS TREASURY EQUITY SHARES AMOUNT CAPITAL (DEFICIT) STOCK (DEFICIT) ------ ------ ---------- --------- -------- ------------- Balance, December 31, 1994...................... 15,000 $150 $ -- $(15,903) $ -- $(15,753) Issuance of Common Stock...................... 4,600 46 66,591 -- -- 66,637 Net income.................................... -- -- -- 17,831 -- 17,831 ------ ---- -------- -------- ------- -------- Balance, December 31, 1995...................... 19,600 196 66,591 1,928 -- 68,715 Issuance of Common Stock...................... 2,300 23 99,625 -- -- 99,648 Exercise of stock options, including income tax benefits of $3,412..................... 550 6 10,037 -- -- 10,043 Purchase of Treasury Stock.................... -- -- -- -- (933) (933) Issuance of Treasury Stock.................... -- -- -- (223) 697 474 Net income.................................... -- -- -- 37,838 -- 37,838 ------ ---- -------- -------- ------- -------- Balance, December 31, 1996...................... 22,450 225 176,253 39,543 (236) 215,785 Purchase of Treasury Stock.................... -- -- -- -- (1,051) (1,051) Issuance of Treasury Stock.................... -- -- -- (169) 835 666 Net income.................................... -- -- -- 23,429 -- 23,429 ------ ---- -------- -------- ------- -------- Balance, December 31, 1997...................... 22,450 $225 $176,253 $ 62,803 $ (452) $238,829 ====== ==== ======== ======== ======= ========
The accompanying notes are an integral part of these consolidated financial statements. F-5 35 ATLAS AIR, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEAR ENDED DECEMBER 31, ----------------------------------- 1997 1996 1995 ----------- --------- --------- OPERATING ACTIVITIES: Net income............................................... $ 23,429 $ 37,838 $ 17,831 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.......................... 44,506 25,156 14,793 Amortization of debt issuance costs.................... 3,620 2,278 546 Net gain on disposition of property and equipment...... (1,029) -- -- Write-off of capital investment and other.............. 27,100 -- -- Interest financed...................................... -- -- 1,258 Change in deferred income tax payable.................. 11,622 14,731 8,144 Extraordinary gain..................................... (26,363) -- -- Changes in operating assets and liabilities: Accounts receivable and other....................... (16,052) (31,009) (10,751) Deposits............................................ (1,040) 592 5,716 Accounts payable and accrued expenses............... 27,992 28,824 5,770 Income tax payable.................................. (6,113) 6,003 264 ----------- --------- --------- Net cash provided by operating activities...... 87,672 84,413 43,571 INVESTMENT ACTIVITIES: Purchase of property and equipment....................... (367,787) (289,675) (190,807) Proceeds from sale of property and equipment............. 3,750 -- -- Purchase of short-term investments....................... (2,505,530) (246,387) -- Maturity of short-term investments....................... 2,508,765 131,517 -- Advances of notes receivable............................. -- -- (550) ----------- --------- --------- Net cash used in investing activities.......... (360,802) (404,545) (191,357) FINANCING ACTIVITIES: Issuance of Common Stock................................. -- 106,279 66,637 Purchase of Treasury Stock............................... (1,051) (933) -- Issuance of Treasury Stock............................... 666 474 -- Borrowings on notes payable.............................. 815,767 154,808 181,680 Principal payments on notes payable...................... (494,121) (21,640) (7,792) Debt issuance costs...................................... (16,590) (6,053) (4,573) Advances from affiliate, net............................. -- -- (1,700) ----------- --------- --------- Net cash provided by financing activities ..... 304,671 232,935 234,252 ----------- --------- --------- Net increase (decrease) in cash................ 31,541 (87,197) 86,466 Cash and cash equivalents at beginning of period......... 9,793 96,990 10,524 ----------- --------- --------- Cash and cash equivalents at end of period............... $ 41,334 $ 9,793 $ 96,990 =========== ========= =========
The accompanying notes are an integral part of these consolidated financial statements. F-6 36 ATLAS AIR, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Atlas Air, Inc. (the "Company") provides airport to airport cargo services throughout the world to major international airlines pursuant to contractual arrangements with its customers in which the Company provides the aircraft, crew, maintenance and insurance ("ACMI"), referred to as "contract services." The Company also provides charter services and scheduled services on an ad hoc basis. The principal markets served by the Company are Asia and the Pacific Rim from the United States and Europe, and between South America and the United States. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Property and Equipment Owned aircraft are stated at cost. Expenditures for major additions, improvements, flight equipment modifications and certain overhaul and maintenance costs are capitalized. A significant portion of scheduled and unscheduled maintenance is contracted with two maintenance providers under long-term agreements pursuant to which monthly reserve payments are made to the providers based on flight-hours and such amounts are charged to expense currently. Other maintenance and repairs are charged to expense as incurred, except for significant engine overhaul maintenance which is capitalized and charged to expense on a flight-hour basis and D checks which are capitalized and amortized over the corresponding life. Owned aircraft are depreciated over their estimated useful lives of 20 years, using the straight-line method and estimated salvage values of 10% of cost. The cost and accumulated depreciation of property and equipment disposed of are removed from the related accounts and any gain or loss is reflected in the results of operations. Substantially all property and equipment is specifically pledged as collateral for indebtedness of the Company. Whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, management evaluates the recorded asset balances, net of accumulated depreciation, for impairment based on the undiscounted cash flows associated with the asset. Management believes that there have been no events or changes in circumstances which would require review of such recoverability. Capitalized Interest Interest attributable to funds used to finance the acquisition and modification of aircraft is capitalized as an additional cost of the related aircraft. Interest is capitalized at the Company's weighted average interest rate on long-term debt, or where applicable, the interest rate related to specific borrowings. Capitalization of interest ceases when the aircraft is placed in service. Capitalized interest was $16,115,000, $5,347,000, and $3,573,000 for the years ended December 31, 1997, 1996 and 1995, respectively. F-7 37 ATLAS AIR, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Deferred Costs Costs associated with the issuance of debt are capitalized and amortized over the life of the respective debt obligation, using the effective interest method for amortization. In May 1997, $3,647,000 of unamortized deferred loan costs was charged against the extraordinary gain recognized upon early extinguishment of certain debt (see Note 3). Amortization of debt issuance costs was $3,620,000, $2,278,000 and $546,000 for the years ended December 31, 1997, 1996 and 1995, respectively. Cash Equivalents All highly liquid investments with an original maturity of three months or less are considered to be cash equivalents, except certain investments in debt securities which are classified as short-term investments. Short-Term Investments All investments in debt securities, other than money market funds, with a current maturity of less than one year, are considered to be short-term investments (see Note 2). Earnings per Share In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings per Share," effective for financial statements for both interim and annual periods ending after December 15, 1997. SFAS No. 128 requires the dual presentation of basic earnings per share ("basic EPS"), which replaces primary earnings per share, and diluted earnings per share ("diluted EPS"). Basic EPS is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted EPS is computed similar to basic EPS except that the weighted-average number of common shares outstanding during the period is adjusted for the incremental shares attributed to outstanding options to purchase common stock. Options to acquire 405,000, 399,000 and 294,720 shares in 1997, 1996 and 1995, respectively, were not included in the computation of diluted EPS because the option price was greater than the average market price of the Company's common stock. Income Taxes The Company provides for income taxes using the asset and liability method prescribed by SFAS No. 109, "Accounting for Income Taxes." Under this method deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The effect on deferred taxes of a change in tax laws or tax rates is recognized in income in the period that includes the enactment date. Fair Value of Financial Instruments The Company's financial instruments consist of cash, certificates of deposit, short-term investments, short-term trade receivables and payables, long-term debt and deferred aircraft obligations. The carrying values of cash, certificates of deposit, and short-term trade receivables and payables approximate fair value. The fair value of long-term debt is estimated based on current rates available for similar debt with similar maturities and security (see Note 3). The fair value of deferred aircraft obligations is based upon the fair value of the purchase contracts associated with the obligations. F-8 38 ATLAS AIR, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Hedges The Company may from time to time enter into swaps to reduce exposure to interest rate fluctuations in connection with certain debt. The cash flows of the swaps mirror those of the underlying exposures. The premiums on the swaps, as measured at inception, are amortized over their respective lives as components of interest expense. Any gains or losses realized upon the early termination of these swaps are deferred and recognized in income over the remaining life of the underlying exposure. Significant Customers and Concentration of Credit Risk For the year ended December 31, 1997, China Airlines Ltd. ("China Airlines"), Fast Air Carrier, S.A. ("Fast Air") and Lufthansa Cargo AG ("Lufthansa") accounted for approximately 34%, 11% and 8%, of the Company's total revenues, respectively. For the year ended December 31, 1996, China Airlines, KLM Royal Dutch Airlines ("KLM") and Lufthansa accounted for approximately 34%, 12% and 11%, of the Company's total revenues, respectively. For the year ended December 31, 1995, China Airlines, KLM and Varig Brazilian Airlines ("Varig") accounted for approximately 60%, 19% and 11% of the Company's total revenue, respectively. Accounts receivable from these principal customers were $18,963,000 and $18,344,000 in the aggregate at December 31, 1997 and 1996, respectively. The Company is in dispute with one of its customers with respect to the validity of certain charges for materials and labor that the customer has invoiced to the Company, and with respect to certain ACMI billings. Reclassifications Certain prior year amounts have been reclassified to conform to current year presentation. Supplemental Cash Flow Information The aggregate interest payments made by the Company, net of amounts capitalized, were $55,097,000, $30,744,000 and $15,563,000 for the years ended December 31, 1997, 1996 and 1995, respectively. Prior to December 1995, the required monthly payment under the ING Bank loan agreement was less than the accrued interest, thus causing $1,258,000 of accrued interest in 1995 to be financed by the lender as an increase in the principal balance (see Note 3). The Company made federal and state income tax payments of approximately $7,959,000, $750,000 and $399,000 in the years ended December 31, 1997, 1996 and 1995, respectively. Reporting Comprehensive Income In June 1997, the Financial Accounting Standards Board issued SFAS No. 130 "Reporting Comprehensive Income," which establishes standards for reporting and display of comprehensive income and its components in a full set of general purpose financial statements. The objective of SFAS No. 130 is to report a measure of all changes in equity of an enterprise that result from transactions and other economic events of the period other than transactions with owners. Comprehensive income includes net income plus other comprehensive income (other revenues, expenses, gains, and losses that under generally accepted accounting principles bypass net income). The Company does not expect other comprehensive income to be material. The effective date for the application of SFAS No. 130 for both interim and annual periods is for fiscal years beginning after December 15, 1997 with earlier application permitted. 2. SHORT-TERM INVESTMENTS Proceeds from the secondary public offering of the Company's common stock ("SPO") in May 1996, plus additional funds, were invested in various held-to-maturity securities, as defined in SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," which requires investments in debt F-9 39 ATLAS AIR, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) securities to be classified as held-to-maturity and measured at amortized cost only if the reporting enterprise has the positive intent and ability to hold those securities to maturity. The following table sets forth the aggregate fair value, gross unrealized holding gains, gross unrealized holding losses, and amortized/accreted cost basis by major security type as of December 31, 1997 (in thousands):
AGGREGATE GROSS UNREALIZED GROSS UNREALIZED (AMORTIZATION) SECURITY TYPE FAIR VALUE HOLDING GAINS HOLDING LOSSES ACCRETION ------------- ---------- ---------------- ---------------- -------------- Commercial Paper............... $ 56,466 $ -- $ 7 $(406) U.S. Government Agencies....... 16,061 2 1 (138) Corporate Notes................ 4,995 -- -- (3) Market Auction Preferreds...... 23,800 -- -- -- Adjustable Rate Mortgages...... 10,000 -- -- -- -------- ---- ---- ----- Totals............... $111,322 $ 2 $ 8 $(547) ======== ==== ==== =====
In addition, accrued interest on short-term investments at December 31, 1997 was approximately $307,000. Interest earned on these investments and maturities of these investments are reinvested in similar securities. 3. LONG-TERM DEBT Long-term debt and current maturities are as follows (in thousands):
DECEMBER 31, -------------------- 1997 1996 -------- -------- ING Bank Debt............................................... $ -- $225,112 Lufthansa Debt.............................................. -- 9,556 Equipment Notes............................................. 100,000 100,000 Finova Debt................................................. 30,048 32,503 Aircraft Acquisition Credit Facility........................ 85,000 113,469 Nationsbanc................................................. 23,056 -- AFL Term Loan Facility...................................... 185,000 -- AFL II Term Loan Facility................................... 185,000 -- Senior Notes................................................ 150,000 -- Nationsbanc -- AFI Debt..................................... 14,984 -- Other....................................................... 2,987 3,789 -------- -------- 776,075 484,429 Current maturities.......................................... (40,049) (21,561) -------- -------- Long-term debt, net......................................... $736,026 $462,868 ======== ========
ING Bank Debt In December 1994, the Company renegotiated its loan agreement with ING Bank. Pursuant to the new loan agreement, ING Bank agreed to provide up to $231 million of financing to the Company for the purpose of refinancing its existing loan, financing additional aircraft and the associated costs of converting those aircraft to freighter configuration, among other things. Subsequently, ING Bank increased the size of its commitment under the new loan agreement to $232.9 million. For all but $30,000,000 of the total indebtedness to ING Bank (which amount was financed at a fixed interest rate of 11.53% through September 1995, at which time the interest rate was converted to one-month LIBOR ("London Interbank Offered Rate") plus 2.65%), the loan agreement accrued interest at one-month LIBOR plus 2.65%. Certain debt covenants under the ING Bank debt precluded one of the Company's F-10 40 ATLAS AIR, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) subsidiaries from declaring dividends, redeeming its own stock for value, or returning any capital to its stockholders. In May 1997, the Company used proceeds from the AFL Term Loan Facility (see below) and approximately $7.6 million in cash to extinguish its ING Bank debt. The Company recognized an extraordinary gain of $16.7 million (net of taxes of $9.6 million) as a result of such extinguishment. Lufthansa Debt In the first quarter of 1995, the Company purchased two aircraft in passenger configuration from Lufthansa, which financed approximately $12.5 million of the purchase price of each aircraft, for which the Company accrued interest at an annual rate of 8.8%. In May 1997, the Company paid $6.3 million to satisfy the remaining Lufthansa debt balance in conjunction with the refinancing of these aircraft under the AFL Term Loan Facility (see below). Equipment Notes In November 1995, the Company sold $100 million of 12 1/4% Pass Through Certificates. Each 12 1/4% Pass Through Certificate due 2002 (each a "Certificate") represents a fractional undivided interest in the Atlas Air Pass Through Trust (the "Trust") formed pursuant to a pass through trust agreement between the Company and First Fidelity Bank, N.A., as trustee under the Trust. The property of the Trust consists of 12 1/4% Senior Secured Notes due 2002 (the "Equipment Notes") issued by the Company to finance, together with funds from the Company, the acquisition and conversion cost of three Boeing 747 aircraft (the "Collateral Aircraft") that were acquired by the Company in the fourth quarter of 1995 and converted to freighter configuration in the first quarter of 1996. The Company issued the related Equipment Notes during the fourth quarter of 1995 and the first quarter of 1996 at or prior to the time pre-delivery deposits and final purchase price payments were required to be made with respect to the Collateral Aircraft. Interest on the Equipment Notes is passed through to the Certificateholders on June 1 and December 1 of each year, at a rate per annum of 12 1/4%. The Equipment Notes are redeemable at the option of the Company, in whole or in part, at any time on or after December 1, 1998 at redemption prices ranging from 108% in 1998 to 100% in 2001 and thereafter, together with accrued and unpaid interest, if any, to the date of redemption. The Company is required to provide for the retirement of one-third of the aggregate principal amount of the Equipment Notes on December 1 in each of 2000 and 2001 through the operation of a sinking fund at a redemption price of 100% of the principal amount thereof, together with accrued interest thereon to the redemption date. Covenants with respect to the Collateral Aircraft require specific levels of insurance, as well as contain requirements regarding possession, maintenance, lease or transfer of the aircraft. Certain covenants applicable to the Company include, among other restrictions, limitations on indebtedness, restricted payments and restriction on certain asset sales. The Company was in compliance with all of its covenants as of December 31, 1997. Finova Debt The Company obtained financing from Finova Capital Corporation for approximately 80% of the total acquisition and conversion cost of the first of six aircraft purchased from Thai Airways International Public Company Limited (the "Thai Aircraft") (see below), or $32.8 million. The loan accrues interest at 10.13% and matures on October 1, 2003. The loan is secured by a first priority security interest in the first Thai Aircraft. F-11 41 ATLAS AIR, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Aircraft Acquisition Credit Facility In May 1996, the Company entered into a $175 million revolving credit facility (the "Aircraft Acquisition Credit Facility") with Goldman Sachs Credit Partners L.P. ("Goldman Sachs"), as Syndication Agent, and Bankers Trust Company ("BTCo"), as Administrative Agent. This revolving loan facility provides for the acquisition and conversion of flight equipment. The Aircraft Acquisition Credit Facility was subsequently amended and restated in conjunction with certain refinancings. The Third Amended and Restated Credit Facility provides for a $250 million revolving credit facility as of September 5, 1997 with a two-year revolving period and a subsequent three-year term loan period in the event that permanent financing has not been obtained for any flight equipment financed under the facility. At the time of each borrowing, the Company must select either a Base Rate Loan (prime rate, plus 1.5% through May 8, 1998, thereafter plus 2.0%) or a Eurodollar Rate Loan (Eurodollar rate, plus 2.5% through May 8, 1998, thereafter plus 3.0%). The Eurodollar Rate Loan was selected by the Company for substantially all borrowings in 1996 and 1997. The weighted average interest rate on borrowings outstanding under the Aircraft Acquisition Credit Facility was 8.38% at December 31, 1997. Each borrowing is secured by a first priority security interest in the collateral flight equipment of that borrowing. Certain tests must be met before each purchase of aircraft and related drawdown on the facility. To date, the Company has met these tests. If in the future, the Company cannot meet all the tests because of the difficult sequencing of aircraft acquisition, aircraft conversion and customer contracts, the Company believes that other financing sources would be available to the Company or that it would acquire aircraft using its internal cash or seek a waiver of any necessary conditions. As of December 31, 1997, the Company had $85.0 million outstanding under the Aircraft Acquisition Credit Facility. Covenants with respect to the Aircraft Acquisition Credit Facility require specific levels of insurance, as well as contain requirements regarding possession, maintenance, and lease or transfer of the flight equipment. Certain covenants applicable to the Company include, among other restrictions, limitations on indebtedness, liens, investments, contingent obligations, restricted junior payments, capital expenditures and leases. The Company was in compliance with all of its covenants at December 31, 1997. Nationsbanc In March 1997, the Company refinanced one of its aircraft with Nationsbanc Leasing Corporation ("Nationsbanc"). This aircraft was previously financed through the Aircraft Acquisition Credit Facility. As such, this refinancing increased the availability of funds under the Aircraft Acquisition Credit Facility by approximately $25 million. The Nationsbanc financing is a seven year term loan (extendible under certain circumstances to ten years) which provides for a fixed interest rate of 9.16%. The loan is secured by a first priority security interest in this aircraft. AFL Term Loan Facility In May 1997, the Company formed a wholly-owned subsidiary, Atlas Freighter Leasing, Inc. ("AFL"), for the purpose of entering into the $185 million AFL Term Loan Facility (the "AFL Term Loan Facility") to refinance six Boeing 747-200 aircraft previously financed through the ING Bank debt (see above). Concurrent with entering into the AFL Term Loan Facility, the proceeds of the AFL Term Loan Facility were used to repay all existing principal and interest due under the ING Bank debt. Interest is based on the Eurodollar rate, plus 2.5% for the first three years and 3.0% thereafter, and is payable quarterly. The interest rate on borrowings outstanding under the AFL Term Loan Facility was 8.38% at December 31, 1997. Quarterly scheduled principal payments of $2.5 million commenced in February 1998 and increase to $5.7 million in August 1998 with a final payment of $50.0 million in May 2004. The AFL Term Loan Facility is secured by a first priority interest in the six subject aircraft and is restrictive with respect to limitations on indebtedness, liens, investments, contingent obligations, restricted junior payments, capital expenditures, F-12 42 ATLAS AIR, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) amendments of material agreements, leases, transactions with shareholders and affiliates and the conduct of business. The Company was in compliance with all of its covenants as of December 31, 1997. AFL II Term Loan Facility In September 1997, the Company formed another wholly-owned subsidiary, Atlas Freighter Leasing II, Inc. ("AFL II") for the purpose of entering into the $185 million AFL II Term Loan Facility (the "AFL II Term Loan Facility") to refinance four of the aircraft previously financed under the Aircraft Acquisition Credit Facility, plus nine spare engines, in order to provide the Company with greater financial flexibility in anticipation of the financing requirements for the future acquisition of additional aircraft. Interest is based on the Eurodollar rate, plus 2.25%, less a pricing reduction, if any, in effect from time to time and is payable quarterly. The interest rate on borrowings outstanding under the AFL II Term Loan Facility was 8.13% at December 31, 1997. Quarterly scheduled principal payments of $2.5 million commenced in February 1998 and increase to $5.7 million in August 1998 with a final payment of $50.0 million in May 2004. The AFL II Term Loan Facility is secured by a first priority interest in the four subject aircraft, plus nine spare engines, and is restrictive with respect to limitations on indebtedness, liens, investments, contingent obligations, restricted junior payments, capital expenditures, amendments of material agreements, leases, transactions with shareholders and affiliates and the conduct of business. The Company was in compliance with all of its covenants as of December 31, 1997. Senior Notes In August 1997, the Company completed the offering of its unsecured 10 3/4% Senior Notes due 2005 ("Senior Notes"). The proceeds from the offering of the Senior Notes were used to, among other things, repay short-term indebtedness incurred by the Company to make pre-delivery deposits to The Boeing Company ("Boeing") for the purchase of 10 new freighter aircraft (see Note 6) and for additional pre-delivery deposits as they become due. Interest on the Senior Notes began to accrue from their date of original issuance and is payable semi-annually in arrears on February 1 and August 1 of each year, at the rate of 10 3/4% per annum. The Senior Notes are redeemable, in whole or in part, at the option of the Company, on or after August 1, 2001, at 105.375%, 102.688% and 100.000% for the years 2001, 2002 and 2003 and thereafter, respectively, plus accrued interest to the date of redemption. In addition, at any time on or prior to August 1, 2000, the Company, at its option, may redeem up to 35% of the aggregate principal amount of the Senior Notes originally issued with the net cash proceeds of one or more public equity offerings, at a redemption price equal to 110.75% of the principal amount thereof plus accrued interest to the date of redemption; provided that at least 65% of the aggregate principal amount of the Senior Notes originally issued remains outstanding immediately after any such redemption. The Senior Notes are general unsecured obligations of the Company which rank pari passu in right of payment to any existing and future unsecured senior indebtedness of the Company. The Senior Notes are effectively subordinated, however, to all secured indebtedness of the Company and to all indebtedness of the Company's subsidiaries. Covenants with respect to the Senior Notes contain certain limitations on the ability of the Company and its subsidiaries to, among other things, incur additional indebtedness, pay dividends or make certain other restricted payments, consummate certain asset sales, enter into certain transactions with affiliates, incur liens, create restrictions on the ability of a subsidiary to pay dividends or make certain payments, sell or issue preferred stock of subsidiaries to third parties, merge or consolidate with any other person or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the assets of the Company. The Company was in compliance with all of its covenants as of December 31, 1997. F-13 43 ATLAS AIR, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Nationsbanc - AFI Debt In October 1997, Atlas Flightlease, Inc. ("AFI"), a wholly-owned subsidiary of the Company, secured a 2-year LIBOR based financing with Bankers Trust Company for approximately 80% of the purchase price of a 1988 Canadair Challenger passenger aircraft (the "Challenger"). AFI purchased the Challenger from MAC Flightlease, Inc. ("MAC Flightlease"), an entity wholly-owned by the wife of the Company's Chairman, President and CEO (see Note 7), in the third quarter of 1997. In December 1997, AFI refinanced the Challenger for approximately 100% of its purchase price with Nationsbanc under a 5-year loan which was guaranteed by the Company. Interest is based on the Eurodollar rate, plus 2.35%, and is payable quarterly with concurrent scheduled payments of principal. The interest rate on borrowings outstanding under the Nationsbanc debt was 8.26% at December 31, 1997. The loan is secured by a first priority security interest in the Challenger. Covenants with respect to this financing require specific levels of insurance, as well as contain requirements regarding use, maintenance, configuration, liens and disposition of the Challenger, among other things. AFI was in compliance with all of its covenants as of December 31, 1997. Hedges In September 1997, the Company entered into an interest rate swap with BTCo for the purpose of hedging its floating rate debt. The notional amount of the interest rate swap is $210 million, decreasing over a term of eight years. The Company pays a fixed interest rate of 5.72%, increasing .25% annually, and receives a floating interest rate based on 3-month LIBOR, whereby the net interest settles quarterly. The 3-month LIBOR rate for the quarterly interest period which included December 31, 1997 was 5.88%. Fair Value of Long-Term Debt Based on current rates available for similar debt with similar maturities and security, the fair values of the debt in the above table at December 31, 1997, are estimated to be their carrying values. The Equipment Notes and the Senior Notes are publicly traded. Based on published trading prices at December 31, 1997, the fair values of the Equipment Notes and the Senior Notes are estimated to be $111.3 million and $105.6 million, respectively. Five Year Debt Maturities At December 31, 1997 principal repayments on long-term debt for the next five years were as follows (in thousands):
1998 1999 2000 2001 2002 THEREAFTER ------- ------- -------- -------- -------- ---------- Equipment Notes.......... $ -- $ -- $ 33,333 $ 33,333 $ 33,334 $ -- Finova Debt.............. 2,709 3,001 3,317 3,672 4,084 13,263 Aircraft Acquisition Credit Facility........ -- 7,083 28,334 28,333 21,250 -- Nationsbanc.............. 2,865 3,139 3,439 3,768 4,128 5,718 AFL Term Loan Facility... 16,350 22,600 22,600 22,600 22,600 78,250 AFL II Term Loan Facility............... 16,350 22,600 22,600 22,600 22,600 78,250 Senior Notes............. -- -- -- -- -- 150,000 Nationsbanc - AFI Debt... 719 789 1,396 1,516 1,643 8,921 Other.................... 1,056 553 452 488 181 258 ------- ------- -------- -------- -------- -------- $40,049 $59,765 $115,471 $116,310 $109,820 $334,660 ======= ======= ======== ======== ======== ========
F-14 44 ATLAS AIR, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 4. DEFERRED AIRCRAFT OBLIGATIONS In June 1997, the Company entered into an agreement with Boeing to purchase 10 new 747-400 freighter aircraft (the "Boeing Purchase Agreement") (see Note 6). The Boeing Purchase Agreement requires the Company to pay "Pre-Delivery Deposits" in order to secure delivery of the 747-400 freighter aircraft and to defray a portion of the manufacturing costs. In addition, the Boeing Purchase Agreement provides for a deferral of a portion of the Pre-Delivery Deposits (Deferred Aircraft Obligations) for which the Company accrues and pays interest quarterly at 6-month LIBOR, plus 2.00%. As of December 31, 1997, there was $163.2 million of Deferred Aircraft Obligations outstanding and the combined interest rate was 7.97%. The Company will settle its Deferred Aircraft Obligations upon delivery of each of the 10 aircraft, which are scheduled for delivery as follows: five in 1998, two in 1999 and three in 2000. Financing for the first five aircraft has been secured through the EETCs (see Note 16). In addition, the Company may arrange for tax-oriented long-term leases on some or all of these aircraft. 5. INCOME TAXES The Company had net operating loss carryforwards of approximately $122,692,000 as of December 31, 1997 which expire between 2008 and 2017. The Company has generated approximately $8,665,000 of alternative minimum tax credit carryforwards which are available in subsequent years to reduce its regular tax liability subject to statutory limitations. All tax years of the Company that are statutorily open are subject to examination by the Internal Revenue Service ("IRS"), as well as state and local tax authorities. Currently, the fiscal year ended March 31, 1994, the short year ended December 31, 1994 and the calendar year ended December 31, 1995 are under examination by the IRS. The Company believes that it has adequately provided for all income tax liabilities and that final resolution of any IRS examination will not have a material effect on its financial position or results of operations. The provision for income taxes consisted of the following (in thousands):
YEAR ENDED DECEMBER 31, ----------------------------- 1997 1996 1995 ------- ------- ------- Current: Federal............................................. $ 1,704 $ 6,625 $ 251 State and local..................................... 140 394 13 Deferred: Federal............................................. 11,622 14,731 8,144 State and local..................................... -- -- -- ------- ------- ------- Provision for income taxes....................... $13,466 $21,750 $ 8,408 ======= ======= =======
The provisions for income taxes were at rates different from the U.S. federal statutory rate for the following reasons:
YEAR ENDED DECEMBER 31, -------------------------------- 1997 1996 1995 ------ ------ ------ Statutory federal income tax provision rate............. 35.00% 35.00% 35.00% State and local income taxes, net of federal tax benefit............................................... 1.04 .66 -- Nondeductible items..................................... 2.36 2.04 1.44 Reversal of prior year valuation allowance.............. -- -- (4.83) Benefit of net operating loss........................... (1.90) (1.20) -- Other................................................... -- -- .43 ------ ------ ------ Effective tax provision rate.......................... 36.50% 36.50% 32.04% ====== ====== ======
F-15 45 ATLAS AIR, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. The net deferred income tax liability components are as follows (in thousands):
AT DECEMBER 31, ------------------ 1997 1996 ------- ------- Deferred tax liabilities: Tax depreciation in excess of book depreciation........... $96,147 $57,127 Other..................................................... 1,372 1,564 ------- ------- Total deferred tax liabilities.................... 97,519 58,691 Deferred tax assets: Tax benefit of net operating loss carryforwards........... 44,218 20,804 Tax benefit of alternative minimum tax credits............ 8,665 7,020 Other..................................................... 13,551 11,404 ------- ------- Total deferred tax assets......................... 66,434 39,228 ------- ------- Net deferred tax liability........................ $31,085 $19,463 ======= =======
6. COMMITMENTS AND CONTINGENCIES Aircraft Minimum annual rental commitments under noncancelable aircraft operating leases for years ending December 31, are approximately (in thousands): 1998 (one Boeing 747-200 aircraft).......................... $ 4,500 1999 (one Boeing 747-200 aircraft).......................... 4,500 2000 (one Boeing 747-200 aircraft).......................... 4,500 2001 (one Boeing 747-200 aircraft).......................... 4,500 2002 (one Boeing 747-200 aircraft).......................... 4,500 Thereafter (one Boeing 747-200 aircraft).................... 32,625
The above commitments do not include the potential lease financing (if any) of Boeing 747-400 freighter aircraft scheduled for delivery during 1998, 1999 and 2000. In addition to the above commitments, the Company leases engines under short-term lease agreements on an as needed basis. Aircraft and engine rentals, including short-term rentals, were $31,644,000, $27,341,000 and $22,902,000 for the years ended December 31, 1997, 1996 and 1995, respectively. Boeing Purchase Agreement In June 1997, the Company entered into the Boeing Purchase Agreement to purchase 10 new 747-400 freighter aircraft to be powered by GE engines. The 747-400 freighter aircraft are currently scheduled to be delivered as follows: five in 1998, two in 1999 and three in 2000. Due to production problems at Boeing, the Company believes that each of the 1998 delivery positions of the 747-400 aircraft may be delayed up to 60 days. While Boeing will compensate the Company for defined delays in delivery of the 747-400 aircraft, any such delays may adversely impact the Company's ability to initiate service with prospective customers in a timely fashion. The Boeing Purchase Agreement also provides the Company with options to purchase up to 10 additional 747-400 freighter aircraft for delivery from 1999 through 2002. As a result of the Company being the largest purchaser of 747-400 freighter aircraft to date, it was able to negotiate from Boeing and GE a significant discount off the aggregate list price of $1.7 billion for the 10 747-400 freighter aircraft, four installed engines per aircraft and five spare engines. In addition, the Company also obtained certain ancillary F-16 46 ATLAS AIR, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) products and services at advantageous prices. The Boeing Purchase Agreement requires that the Company pay Pre-Delivery Deposits to Boeing prior to the delivery date of each 747-400 freighter aircraft in order to secure delivery of the 747-400 freighter aircraft and to defray a portion of the manufacturing costs. The Company expects the maximum total amount of Pre-Delivery Deposits at any time outstanding will be approximately $155 million, approximately $105.1 million of which was paid as of December 31, 1997. For the years 1998 and 1999, the Company expects to pay $67.6 million and $42.6 million, respectively, in accordance with the Pre-Delivery Deposits schedule. In addition, the Boeing Purchase Agreement provides for a deferral of a portion of the Pre-Delivery Deposits (Deferred Aircraft Obligations -- see Note 4) for which the Company accrues and pays interest quarterly at 6-month LIBOR, plus 2.00%. As of December 31, 1997, there was $163.2 million of Deferred Aircraft Obligations outstanding and the combined interest rate was 7.97%. Cargo Modification In December 1997, the Company supplemented its modification contract with Boeing to provide for the cargo configuration of two aircraft (acquired in December 1996 and May 1997) under lease to Philippines Airlines Limited ("PAL"), which were utilized in passenger configuration by PAL during 1997 and in early 1998. The initial deposit for such modification is recorded in Flight Equipment in the December 31, 1997 balance sheet. The remaining commitments to Boeing and other vendors as of December 31, 1997 for both of these aircraft totaled approximately $20.2 million. These commitments are expected to be paid during the first three quarters of 1998. Maintenance Agreements In January 1995, the Company entered into a maintenance agreement with one of its principal customers. This agreement includes a provision which requires the Company to remit a fixed amount per flight hour each month to the customer, subject to a 3.5% annual escalation factor for the first five years, for which the customer will perform most regular maintenance on a substantial portion of the aircraft in the Company's fleet. The agreement extends for a period of ten years. Pursuant to its maintenance agreement, engines may be upgraded when inducted into the maintenance pool in order to improve engine reliability and to lower Company operating costs. When such costs are incurred and identified, they are capitalized and amortized over the remaining life of each applicable engine. As of December 31, 1997, the Company had paid the customer $7.5 million for such costs. The Company expects to incur approximately an additional $2 million to $3 million for such upgrades over the term of the contract. The Company has an agreement, subject to acceptable rates, terms and conditions, with Linee Aeree Italiane S.p.A. ("Alitalia") to utilize, or find other parties to utilize, an amount of Alitalia's maintenance services with an aggregate cost of $25 million over a five-year period ending in June 2000. In June 1996, the Company entered into a ten year engine maintenance agreement with GE for the engine maintenance of up to 15 aircraft powered by CF6-50E2 engines at a fixed rate per flight hour, subject to an annual formula increase. The agreement commenced in the third quarter of 1996 with the acceptance of engines associated with aircraft acquired in the third and fourth quarters of 1996. Pursuant to its maintenance agreement and upon the first time shop visit, the Company is invoiced for certain one-time charges, which the Company capitalizes and amortizes over the lesser of the remaining life of the asset or the remaining life of the maintenance agreement. As of December 31, 1997, the Company had been invoiced for and paid $4.9 million of such charges. Effective in the year 2000, the Company will have an option to add not less than 40 engines to the program. Office and Warehouse In 1995, the Company entered into an operating lease for office space expiring in the year 2000, with two five year renewal provisions. In addition, the Company leases warehouse space for which the initial lease term F-17 47 ATLAS AIR, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) expires at the end of August 1999, and provides for two one-year renewal option periods. Future minimum rental commitments by year are as follows for the years ending December 31: 1998 -- $728,000; 1999 -- $708,000; 2000 -- $277,000. Rental expense, including short-term rentals, was $905,000, $615,000 and $579,000 for the years ended December 31, 1997, 1996 and 1995, respectively. Employment Agreements The Company has entered into employment agreements with certain key employees. Such employment agreements provide for, among other things, base annual salary, certain bonuses, the grant of options to purchase common stock of the Company under the 1995 Stock Option Plan (see Note 14), and in certain circumstances relocation and severance benefits. FAA Airworthiness Directives Under the FAA's Directives issued under its "Aging Aircraft" program, the Company is subject to extensive aircraft examinations and may be required to undertake structural modifications to address the problem of corrosion and structural fatigue. In November 1994, Boeing issued Nacelle Strut Modification Service Bulletins which have been converted into Directives by the FAA. Twelve of the Company's Boeing 747-200 aircraft will have to be brought into compliance with such Directives within the next three years at an estimated cost of approximately $6.0 million. As part of the FAA's overall aging aircraft program, it has issued Directives requiring certain additional aircraft modifications to be accomplished prior to the aircraft reaching 20,000 cycles. The average cycle time for the 17 aircraft in service is approximately 12,000 cycles and the average cycles operated per year is approximately 800 cycles. The Company estimates that the modification costs per aircraft will range between $2 million and $3 million. Between now and the year 2000, only one aircraft is expected to reach the 20,000 cycle limit and nine additional aircraft will require modification prior to 2009. The remaining seven aircraft in service have already undergone such modifications. The two aircraft undergoing modification to freighter configuration will receive the Nacelle Strut Modification as part of the freighter conversion. Other Directives have been issued that require inspections and minor modifications to Boeing 747-200 aircraft. It is possible that additional Directives applicable to the types of aircraft or engines included in the Company's fleet could be issued in the future, the cost of which could be substantial. Upon acquisition of an aircraft, the Company determines whether or not the aircraft is in compliance with Airworthiness Directives and tries to anticipate all future compliance requirements. The necessary work to bring the aircraft into compliance is then scheduled at the time of conversion of the aircraft to freighter configuration, in order to minimize unscheduled maintenance events. Legal Proceedings On February 24, 1997, the Company filed a complaint for declaratory judgment in the Colorado District Court, Jefferson County against Israel Aircraft Industries Ltd. ("IAI") for mechanical problems the Company experienced with respect to an aircraft the Company sub-leased from IAI. The Company is seeking approximately $4 million in damages against IAI to be offset by the amount, if any, the Company owes IAI pursuant to the sub-lease. IAI had the case removed to the U.S. District Court, District of Colorado on April 21, 1997 and has filed counterclaims alleging damages of approximately $9 million based on claims arising from the sub-lease. The Company intends to vigorously defend against all of IAI's claims. In March 1997, Air Support International, Inc. ("ASI") filed a complaint against the Company in the U.S. District Court, Eastern District of New York alleging actual and punitive damages of approximately $13.5 million arising from the Company's refusal to pay commissions which ASI claims it is owed for allegedly arranging certain ACMI Contracts. The Company intends to vigorously defend against all of ASI's claims. F-18 48 ATLAS AIR, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) While the Company is from time to time involved in litigation in the ordinary course of its business, there are no other material legal proceedings pending against the Company or to which any of its property is subject. 7. RELATED PARTY TRANSACTIONS In June 1995, the Company extended a non-interest bearing loan to an officer of the Company in the amount of $125,000 in connection with such officer's relocation to Colorado, which the Company forgave in July 1995. In August and September 1995, the Company extended demand loans to three senior vice presidents of the Company in the aggregate amount of $550,000, bearing interest at an annual rate of 7.50%. Two of the loans plus interest were paid in full in April and May 1996, and the third loan plus interest was paid in full in December 1997. A loan of up to $750,000, bearing interest at 5.87%, was extended in June 1996 to one officer for the purpose of constructing a residence. As of December 31, 1997 the outstanding balance of officer demand loans was $735,000. In November 1995, the Company began renting a Cessna Citation SP, on an as needed basis, from MAC Flightlease for the purpose of corporate business travel. MAC Flightlease is wholly-owned by the wife of the Company's Chairman, President and CEO. The Company paid $265,000 in 1996 and $52,000 in 1995 for such travel, at rates which are considered by the Company to be at fair market value. In October 1997, AFI purchased from MAC Flightlease the Challenger for corporate business travel. Initially, AFI secured a 2-year LIBOR based financing with BTCo for approximately 80% of the purchase price of the Challenger. In December 1997, AFI refinanced the Challenger for approximately 100% of its purchase price with Nationsbanc under a 5-year LIBOR based loan which was guaranteed by the Company. The Company paid $15.3 million for the Challenger, which is considered by the Company to be at fair market value. 8. ACCOUNTS RECEIVABLE AND OTHER The components of accounts receivable and other are as follows (in thousands):
DECEMBER 31, -------------------- 1997 1996 ------- ------- Accounts receivable-trade................................... $58,817 $41,687 Insurance and vendor claims................................. 2,250 5,952 Employee receivables........................................ 771 606 Prepaids and other.......................................... 3,139 1,979 Less: Allowance for doubtful accounts....................... (9,275) (621) ------- ------- $55,702 $49,603 ======= =======
F-19 49 ATLAS AIR, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES The components of accounts payable and accrued expenses are as follows (in thousands):
DECEMBER 31, -------------------- 1997 1996 ------- ------- Accounts payable-trade...................................... $12,291 $15,745 Accrued salaries and wages.................................. 6,779 5,547 Accrued maintenance......................................... 19,012 11,621 Accrued interest............................................ 13,581 3,348 Loss reserves (see Note 10)................................. 18,550 -- Other accrued expenses...................................... 17,892 11,502 ------- ------- $88,105 $47,763 ======= =======
10. WRITE-OFF OF CAPITAL INVESTMENT AND OTHER In conjunction with the June 1997 agreement with Boeing to purchase 10 new 747-400 freighter aircraft, the Company reassessed the economic viability of renewing on a longer-term basis its sub-leases with Federal Express Corporation ("FedEx") for five 747-200 freighter aircraft. Based on the results of this assessment in the second quarter of 1997, the Company decided to schedule the return of these aircraft in the first quarter of 1998. The Company wrote-off its remaining investment in the five FedEx aircraft and established certain other reserves. The impact of the various largely non-recurring charges was $27.1 million, or $17.2 million on an after-tax basis, which comprised write-offs of various leasehold improvements associated with the Company's sub-leases with FedEx of the five 747-200 aircraft and reserves for costs necessary to return the aircraft upon the termination of the sub-leases. In addition, the Company established reserves primarily related to certain customers and vendors for out-of-period items for which the Company is currently in negotiations. In addition, the reserves include estimates for litigation costs and other costs not expected to re-occur. 11. SAVINGS AND RETIREMENT PLAN The Company implemented a 401(k) Retirement Plan (the "Plan") in June 1994, under which eligible employees may contribute up to 15% of their total pay. The Plan covers substantially all employees. The Company did not make contributions to the Plan in 1995. Effective May 1, 1996, the Plan was amended to provide for Company contributions equal to 50% of the first 10% of contributions made by employees, for which the Company incurred an expense of $1,255,000 and $559,000 for the years ended December 31, 1997 and 1996, respectively. 12. BUSINESS SEGMENTS The Company operates in one business segment, which is to provide the common carriage of freight over various worldwide routes. The assets of the Company, principally flight equipment, support its entire worldwide transportation system and are not readily identifiable by geographic area. Property and equipment, other than flight equipment, located in foreign locations is not significant. Foreign sales accounted for 99%, 98% and 99% of total revenues for the years ended December 31, 1997, 1996 and 1995, respectively. All foreign sales were U.S. dollar denominated. F-20 50 ATLAS AIR, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 13. PREFERRED STOCK The Board of Directors is authorized under the restated certificate of incorporation to issue up to 10,000,000 shares of Preferred Stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any series or the designation of such series, without further vote or action by the stockholders. The issuance of Preferred Stock may have the effect of delaying, deferring or preventing a change in control of the Company without further action by the stockholders. The issuance of Preferred Stock with voting and conversion rights may adversely affect the voting power of the holders of common stock, including the loss of voting control to others. At present, the Company has no plans to issue any shares of Preferred Stock. 14. STOCK-BASED COMPENSATION PLANS Employee Stock Purchase Plan In 1995, the Company established an Employee Stock Purchase Plan (the "Stock Purchase Plan"). Employees eligible to participate in the Stock Purchase Plan are those who have completed at least one year of employment with the Company, but excluding employees whose customary employment is not more than five months in any calendar year or 20 hours or less per week. The Stock Purchase Plan is administered by the Compensation Committee of the Board of Directors of the Company which determines the terms and conditions under which shares are offered and corresponding options granted under the Stock Purchase Plan for any Purchase Period, as defined in the Stock Purchase Plan. Employees may contribute up to 15% of their gross base compensation subject to certain limitations. The price per share at which the common stock is purchased pursuant to the Stock Purchase Plan is the lesser of 85% of the fair market value of the common stock on the first or last day of the applicable Purchase Period. The maximum number of shares of common stock which may be issued on the exercise of options purchased under the Stock Purchase Plan is 1,000,000 shares. As of December 31, 1997, 47,984 shares were issued at a weighted average cost of $23.28 to 161 employees who have participated in the Stock Purchase Plan. 1995 Stock Option Plan In 1995, the Company adopted the 1995 Stock Option Plan ("1995 Plan"), whereby employees may be granted options, incentive stock options, share appreciation rights, and restricted shares. The portion of the 1995 Plan applicable to employees is administered by the Compensation Committee of the Board of Directors of the Company which also establishes the terms of the awards. The 1995 Plan also provides for certain automatic grants of nonqualified stock options to non-employee directors which become exercisable on the date of grant and expire on the tenth anniversary of the date of grant. Originally, an aggregate of 1,800,000 shares were reserved for issuance in connection with awards and director's options under the 1995 Plan. Following shareholder approval, an additional 300,000 shares were reserved. Director Stock Plan In August 1996, the Company established the Director Stock Plan (the "Director Plan"), which provides the Company's non-employee directors the option to receive all or a portion of their quarterly remuneration in common stock instead of cash. If a non-employee director elects at the commencement of any quarter to receive his quarterly remuneration, or a portion thereof, in common stock, the number of shares received is determined by dividing the average price for the 30-day period immediately preceding the end of the quarter into the amount of compensation earned for the quarter which the non-employee director chooses not to receive in cash. The effective date of the Director Plan was January 1, 1997. As of December 31, 1997, 861 shares were issued at a weighted average cost of $27.62 to two directors who have participated in the Stock Purchase Plan. F-21 51 ATLAS AIR, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Other In July 1995, options to purchase 125,000 and 71,430 shares of the Company's common stock were granted to an officer ("July 1995 Grant"), who subsequently resigned from his position with the Company to accept a position with an affiliate of the Company, at exercise prices of $10.00 per share and $14.00 per share, respectively. Statement of Financial Accounting Standards No. 123 SFAS No. 123, "Accounting for Stock-Based Compensation," defines a fair value based method of accounting for employee stock options or similar equity instruments. However, SFAS No. 123 allows the continued measurement of compensation cost for such plans using the intrinsic value based method prescribed by Accounting Principals Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," provided that pro forma disclosures are made of net income or loss and net income or loss per share, assuming the fair value based method of SFAS No. 123 had been applied. The Company has elected to account for its stock-based compensation plans under APB Opinion No. 25; accordingly, for purposes of the pro forma disclosures presented below, the Company has computed the fair value of all options granted during 1997, 1996 and 1995, using the Black-Scholes pricing model and the following weighted average assumptions:
ASSUMPTIONS -- 1995 PLAN 1997 1996 1995 ------------------------ ------- -------- ---------- Risk-free interest rates........................... 6.51% 6.31% 6.04% Expected dividend yields........................... -- -- -- Expected lives..................................... 5 years 5 years 2.5 years Expected volatility................................ 65.33% 73.44% 73.44%
If the Company had accounted for its stock-based compensation plans in accordance with SFAS No. 123, the Company's pro forma net income and pro forma net income per common share would have been reported as follows:
1997 1996 1995 ------- ------- ------- Net income (in thousands):................. As Reported $23,429 $37,838 $17,831 Pro Forma 17,875 35,211 15,857 Net income per common share (basic EPS):... As Reported 1.04 1.76 1.06 Pro Forma .80 1.64 .94 Net income per common share (diluted EPS):.................................... As Reported 1.04 1.75 1.06 Pro Forma .79 1.62 .94
F-22 52 ATLAS AIR, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) A summary of the status of the 1995 Plan and the July 1995 Grant at December 31, 1997, 1996 and 1995 and changes during the years then ended is presented in the table below:
1997 1996 1995 ------------------------- -------------------------- ------------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE -------- -------------- --------- -------------- -------- -------------- Outstanding at beginning of year..................... 635,962 $30.09 853,650 $12.99 -- -- Granted.................... 143,146 26.39 369,000 41.44 853,650 $12.99 Exercised.................. -- -- (550,229) 12.11 -- -- Forfeited.................. -- -- (36,459) 16.00 -- -- -------- ------ --------- -------- Outstanding at end of year..................... 779,108 29.41 635,962 30.09 853,650 12.99 ======== ========= ======== Exercisable at end of year..................... 401,762 22.71 166,273 14.21 561,930 10.54 Weighted average fair value of options granted....... $ 15.68 $ 27.27 $ 5.02
The following table summarizes information with regard to the options outstanding at December 31, 1997:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ------------------------------------ ---------------------- WEIGHTED AVERAGE WEIGHTED WEIGHTED REMAINING AVERAGE AVERAGE RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE - --------------- ----------- ----------- -------- ----------- -------- $10.00 -- $14.00................... 111,930 3.6 years.. $12.20 111,930 $12.20 16.00 -- 24.00................... 156,032 7.8 years.. 16.05 103,686 16.08 26.00 -- 38.25................... 192,146 6.5 years.. 29.49 117,146 27.11 41.75 -- 56.38................... 319,000 8.3 years.. 41.94 69,000 42.29 ------- ------- 10.00 -- 56.38................... 779,108 7.1 years.. 29.41 401,762 22.72
15. PROFIT SHARING PLAN Employees who have been employed by the Company for at least twelve months as full-time employees are eligible to participate in the Company's Profit Sharing Plan, which was adopted in 1994. The Profit Sharing Plan provides for payments to eligible employees in semiannual distributions based on the Company's pretax profits. The Company is obligated to make an annual profit sharing contribution of ten percent of the Company's pretax profits, which is defined as net income before taxes, but excluding (i) any income or loss related to charges or credits for unusual or infrequently occurring items or related to intangible assets, and (ii) extraordinary items. Annual profit sharing contributions may be in the form of cash or common stock of the Company. For the years 1997, 1998 and 1999, beginning with an employee's thirteenth month of employment, an employee is entitled to receive a guaranteed profit sharing payment of 10% of salary, except for captains, who receive a guarantee of 20%. The expense for the Profit Sharing Plan for the years ended December 31, 1997, 1996 and 1995 was $4,004,000, $6,779,000 and $2,768,000, respectively. 16. SUBSEQUENT EVENTS (UNAUDITED) In January and February 1998, pursuant to an early lease termination agreement negotiated in November 1997, the Company delivered to Boeing for modification to cargo configuration the aircraft acquired from Marine Midland in December 1996 and the aircraft acquired from Citicorp in May 1997. These aircraft are expected to be re-delivered to the Company in the second quarter and early in the third quarter of F-23 53 ATLAS AIR, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 1998, respectively. The financing for the modification to cargo configuration is secured under the Aircraft Credit Facility. In February 1998, the Company completed an offering of $538.9 million of pass-through certificates, also known as enhanced equipment trust certificates (the "EETCs"). The EETCs are not direct obligations of, or guaranteed by, the Company and therefore will not be included in the Company's consolidated financial statements. The cash proceeds from the transaction were deposited with an escrow agent and will be used to finance (through either leveraged leases or secured debt financings) the debt portion of the acquisition cost of five of the 10 new 747-400 freighter aircraft from Boeing scheduled to be delivered to the Company during the period July 1998 through December 1998. In connection therewith, the Company intends to seek certain owner participants who will commit lease equity financing to be used in leveraged leases of such aircraft. If any funds remain as deposits with the escrow agent for such EETCs at the end of the delivery period, such funds will be distributed back to the certificateholders. Such distribution will include a make-whole premium payable by the Company. In November and December 1997, the Company entered into three Treasury Note hedges, approximating $300 million of principal, for the purpose of minimizing the risk associated with the fluctuations in interest rates, which are the basis for the pricing of the EETCs which were priced in January 1998. The effect of the hedge resulted in a deferred cost of $6.3 million, which will be amortized over the expected twenty-year life associated with this financing. The Company is currently negotiating for the possibility of refinancing two aircraft in the amount of approximately $86 million, currently financed under the Aircraft Acquisition Credit Facility. There is no assurance that this refinancing will be consummated. 17. SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED)
INCOME (LOSS) INCOME (LOSS) BEFORE OPERATING INCOME (LOSS) BEFORE EXTRAORDINARY ITEM NET INCOME INCOME BEFORE EXTRAORDINARY NET ----------------------- ---------- REVENUE (LOSS) INCOME TAXES ITEM INCOME BASIC EPS DILUTED EPS BASIC EPS -------- --------- ------------- ------------- ------- --------- ----------- --------- 1997 First Quarter............... $ 82,049 $ 17,141 $ 7,894 $ 5,013 $ 5,013 $ .22 $ .22 $.22 Second Quarter.............. 93,902 (10,654) (21,562) (13,692) 3,049 (.61) (.61) .14 Third Quarter............... 104,197 21,733 9,804 6,225 6,225 .28 .28 .28 Fourth Quarter.............. 120,893 27,781 14,397 9,142 9,142 .41 .41 .41 1996 First Quarter............... $ 58,649 $ 15,410 $ 9,693 $ 6,203 $ 6,203 $ .32 $ .31 $.32 Second Quarter.............. 72,614 22,667 15,685 10,037 10,037 .47 .46 .47 Third Quarter............... 79,681 20,046 12,839 8,201 8,201 .37 .36 .37 Fourth Quarter.............. 104,715 29,940 21,371 13,397 13,397 .60 .59 .60 NET INCOME ----------- DILUTED EPS ----------- 1997 First Quarter............... $.22 Second Quarter.............. .14 Third Quarter............... .28 Fourth Quarter.............. .41 1996 First Quarter............... $.31 Second Quarter.............. .46 Third Quarter............... .36 Fourth Quarter.............. .59
F-24 54 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION ------- ----------- +2.1 -- Plan of Reorganization and Merger Agreement dated as of July 12, 1995 by and between Holdings and the Company. +3.2 -- Restated Certificate of Incorporation of the Company. +3.3 -- Amended and Restated By-Laws of the Company. ++4.1 -- Form of Indenture between the Company and First Fidelity Bank, N.A., as Trustee. ++4.2 -- Form of Second Indenture between the Company and First Fidelity Bank, N.A., as Trustee. ++4.3 -- Form of Pass Through Trust Agreement between the Company and First Fidelity Bank, N.A., as Trustee (with form of Pass Through Certificate attached as exhibit thereto). ++4.4 -- Form of Pass Through Agreement between the Company and First Fidelity Bank, N.A., as Trustee (with form of Pass Through Certificate attached as exhibit thereto). +10.14 -- Boeing 747 Maintenance Agreement dated January 1, 1995, between the Company and KLM Royal Dutch Airlines, as amended. +10.15 -- Atlas Air, Inc. 1995 Long Term Incentive and Stock Award Plan. +10.16 -- Atlas Air, Inc. Employee Stock Purchase Plan. +10.17 -- Atlas Air, Inc. Profit Sharing Plan. +10.18 -- Atlas Air, Inc. Retirement Plan. ++10.19 -- Employment Agreement between the Company and Michael A. Chowdry. ++10.20 -- Employment Agreement between the Company and Richard H. Shuyler. ++10.23 -- Employment Agreement between the Company and James T. Matheny. +10.26 -- Maintenance Agreement between the Company and Hong Kong Aircraft Engineering Company Limited dated April 12, 1995, for the performance of certain maintenance events. +10.30 -- Conditional Sales Agreement dated as of September 22, 1994 by and between Lufthansa and the Company relating to B747-230 aircraft, registration D-ABYS. +10.31 -- Conditional Sales Agreement dated as of September 22, 1994 by and between Lufthansa and the Company relating to B747-230 aircraft, registration D-ABYL. *10.36 -- Aircraft Purchase Agreement, dated as of January 19, 1996 between Langdon Asset Management, Inc. and the Company. ***10.52 -- Employment Agreement dated as of November 18, 1996 between the Company and R. Terrence Rendlerman. ***10.53 -- Secured Loan Agreement by and between the Company and Finova Capital Corporation dated April 11, 1996. ***10.54 -- Second Amended and Restated Credit Agreement among the Company and the Lenders listed therein, Goldman Sachs Credit Partners L.P. (as syndication agent) and Bankers Trust Company (as Administrative Agent) dated February 28, 1997. ***/****10.55 -- Engine Maintenance Agreement between the Company and General Electric Company dated June 6, 1996. **10.56 -- Employment Agreement dated as of May 1, 1997 between the Company and Stanley G. Wraight.
55
EXHIBIT NUMBER DESCRIPTION ------- ----------- **10.58 -- Third Amended and Restated Credit Agreement among the Company, the Lenders listed therein, Goldman Sachs Credit Partners L.P. (as Syndication Agent) and Bankers Trust Company (as Administrative Agent) dated September 5, 1997. **10.59 -- Credit Agreement among Atlas Freighter Leasing, Inc., the Lenders listed therein and Bankers Trust Company, as agent, dated May 29, 1997. **10.60 -- Lease Agreement between Atlas Freighter Leasing, Inc., as lessor, and the Company, as lessee, relating to B747-200 aircraft. U.S. Registration No. N516MC. **10.61 -- Lease Agreement between Atlas Freighter Leasing, Inc., as lessor, and the Company, as lessee, relating to B747-200 aircraft. U.S. Registration No. N508MC. **10.62 -- Lease Agreement between Atlas Freighter Leasing, Inc., as lessor, and the Company, as lessee relating to B747-200 aircraft. U.S. Registration No. N507MC. **10.63 -- Lease Agreement between Atlas Freighter Leasing, Inc., as lessor, and the Company, as lessee, relating to B747-200 aircraft. U.S. Registration No. N509MC. **10.64 -- Lease Agreement between Atlas Freighter Leasing, Inc., as lessor, and the Company, as lessee, relating to B747-200 aircraft. U.S. Registration No. N808MC. **10.65 -- Lease Agreement between Atlas Freighter Leasing Inc., as lessor, and the Company, as lessee, relating to B747-200 aircraft. U.S. Registration No. N505MC. **10.66 -- Security Agreement and Chattel Mortgage between the Company, Atlas Freighter Leasing, Inc. and Bankers Trust Company, as agent, relating to B747-200 aircraft. U.S. Registration No. N808MC. **10.67 -- Security Agreement and Chattel Mortgage between the Company, Atlas Freighter Leasing, Inc. and Bankers Trust Company, as agent relating to B747-200 aircraft U.S. Registration No. N507MC. **10.68 -- Security Agreement and Chattel Mortgage between the Company, Atlas Freighter Leasing, Inc. and Bankers Trust Company, as agent, relating to B747-200 aircraft. U.S. Registration No. N509MC. **10.69 -- Security Agreement and Chattel Mortgage between the Company, Atlas Freighter Leasing, Inc. and Bankers Trust Company, as agent, relating to B747-200 aircraft. U.S. Registration No. N505MC. **10.70 -- Security Agreement and Chattel Mortgage between the Company, Atlas Freighter Leasing, Inc. and Bankers Trust Company, as agent, relating to B747-200 aircraft. U.S. Registration No. N508MC. **10.71 -- Security Agreement and Chattel Mortgage between the Company, Atlas Freighter Leasing, Inc. and Bankers Trust Company, as agent, relating to B747-200 aircraft. U.S. Registration No. N516MC. **10.72 -- Form of Indenture, dated August 13, 1997, between the Company and State Street Bank and Trust Company, as Trustee, relating to the 10 3/4% Senior Notes (with form of Note attached as exhibit thereto). **10.73 -- Purchase Agreement, dated August 8, 1997, between the Company and BT Securities Corporation relating to the 10 3/4% Senior Notes. **10.74 -- Registration Rights Agreement, dated August 13, 1997, between the Company and BT Securities Corporation relating to the 10 3/4% Senior Notes. **10.75 -- Credit Agreement among Atlas Freighter Leasing II, Inc., the Lenders listed therein, Bankers Trust Company (as Administrative Agent) and Goldman Sachs Credit Partners L.P. (as Syndication Agent) dated September 5, 1997.
56
EXHIBIT NUMBER DESCRIPTION ------- ----------- **10.76 -- Lease Agreement dated September 5, 1997 between Atlas Freighter Leasing II, Inc., as lessor, and the Company, as lessee, relating to B747-200 aircraft, U.S. Registration No. N527MC and Spare Engine Nos. 517538, 517539 and 455167. **10.77 -- Lease Agreement dated September 5, 1997 between Atlas Freighter Leasing II, Inc., as lessor, and the Company, as lessee, relating to B747-200 aircraft, U.S. Registration No. N523MC and Spare Engine Nos. 530168 and 517530. **10.78 -- Lease Agreement dated September 5, 1997 between Atlas Freighter Leasing II, Inc., as lessor, and the Company, as lessee, relating to B747-200 aircraft, U.S. Registration No. N524MC and Spare Engine Nos. 517790 and 517602. **10.79 -- Lease Agreement dated September 5, 1997 between Atlas Freighter Leasing II, Inc., as lessor, and the Company, as lessee, relating to B747-200 aircraft, U.S. Registration No. N526MC and Spare Engine Nos. 517544 and 517547. **10.80 -- Security Agreement and Chattel Mortgage dated September 5, 1997 between Atlas Freighter Leasing II, Inc., the Company and Bankers Trust Company, as Agent, relating to B747-200 aircraft, U.S. Registration No. N523MC and Spare Engine Nos. 530168 and 517530. **10.81 -- Security Agreement and Chattel Mortgage dated September 5, 1997 between Atlas Freighter Leasing II, Inc., the Company and Bankers Trust Company, as Agent, relating to B747-200 aircraft, U.S. Registration No. N524MC and Spare Engine Nos. 517790 and 517602. **10.82 -- Security Agreement and Chattel Mortgage dated September 5, 1997 between Atlas Freighter Leasing II, Inc., the Company and Bankers Trust Company, as Agent, relating to B747-200 aircraft, U.S. Registration No. N526MC and Spare Engine Nos. 517544 and 517547. **10.84 -- Security Agreement and Chattel Mortgage dated September 5, 1997 between Atlas Freighter Leasing II, Inc., the Company and Bankers Trust Company, as Agent, relating to B747-200 aircraft, U.S. Registration No. N527MC and Spare Engine Nos. 517538, 517539 and 455167. **10.85 -- First Amendment to Lease Agreement among Atlas Freighter Leasing, Inc. and Bankers Trust Company, as agent, dated September 5, 1997. **/****10.86 -- Purchase Agreement Number 2021 between The Boeing Company and the Company dated June 6, 1997. **10.87 -- Aircraft General Terms Agreement between The Boeing Company and the Company dated June 6, 1997. 10.88 -- Placement Agreement, dated January 27, 1998, among the Company, Morgan Stanley & Co. Incorporated, BT Alex. Brown Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co. relating to the Pass Through Certificates Series 1998-1. 10.89 -- Registration Rights Agreement, dated February 9, 1998, among the Company, Morgan Stanley & Co. Incorporated, BT Alex. Brown Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co. relating to the Pass Through Certificates Series 1998-1. 10.90 -- Pass Through Trust Agreement, dated as of February 9, 1998, between the Company and Wilmington Trust Company, as Trustee, relating to the Atlas Air Pass Through Trust 1998-1A-0.
57
EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.91 -- Pass Through Trust Agreement, dated as of February 9, 1998, between the Company and Wilmington Trust Company, as Trustee, relating to the Atlas Air Pass Through Trust 1998-1A-S. 10.92 -- Pass Through Trust Agreement, dated as of February 9, 1998, between the Company and Wilmington Trust Company, as Trustee, relating to the Atlas Air Pass Through Trust 1998-1B-0. 10.93 -- Pass Through Trust Agreement, dated as of February 9, 1998, between the Company and Wilmington Trust Company, as Trustee, relating to the Atlas Air Pass Through Trust 1998-1B-S. 10.94 -- Pass Through Trust Agreement, dated as of February 9, 1998, between the Company and Wilmington Trust Company, as Trustee, relating to the Atlas Air Pass Through Trust 1998-1C-0. 10.95 -- Pass Through Trust Agreement, dated as of February 9, 1998, between the Company and Wilmington Trust Company, as Trustee, relating to the Atlas Air Pass Through Trust 1998-1C-S. 10.96 -- Deposit Agreement (Class A), dated as of February 9, 1998, between First Security Bank, National Association, as Escrow Agent, and ABN AMRO Bank N.V., acting through its Chicago Branch, as Depositary. 10.97 -- Deposit Agreement (Class B), dated as of February 9, 1998, between First Security Bank, National Association, as Escrow Agent, and ABN AMRO Bank N.V., acting through its Chicago Branch, as Depositary 10.98 -- Deposit Agreement (Class C), dated as of February 9, 1998, between First Security Bank, National Association, as Escrow Agent, and ABN AMRO Bank N.V., acting through its Chicago Branch, as Depositary 10.99 -- Indemnity Agreement, dated as of February 9, 1998, between ABN AMRO Bank N.V., acting through its Chicago Branch, as Depositary, and the Company. 10.100 -- Escrow and Paying Agent Agreement (Class A), dated as of February 9, 1998, among First Security Bank, National Association, as Escrow Agent, Morgan Stanley & Co. Incorporated, BT Alex. Brown Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co., as Placement Agents, Wilmington Trust Company, not in its individual capacity, but solely as Pass Through Trustee, and Wilmington Trust Company, as Paying Agent. 10.101 -- Escrow and Paying Agent Agreement (Class B), dated as of February 9, 1998, among First Security Bank, National Association, as Escrow Agent, Morgan Stanley & Co. Incorporated, BT Alex. Brown Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co., as Placement Agents, Wilmington Trust Company, not in its individual capacity, but solely as Pass Through Trustee, and Wilmington Trust Company, as Paying Agent. 10.102 -- Escrow and Paying Agent Agreement (Class C), dated as of February 9, 1998, among First Security Bank, National Association, as Escrow Agent, Morgan Stanley & Co. Incorporated, BT Alex. Brown Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co., as Placement Agents, Wilmington Trust Company, not in its individual capacity, but solely as Pass Through Trustee, and Wilmington Trust Company, as Paying Agent. 10.103 -- Revolving Credit Agreement (1998-1A), dated as of February 9, 1998, between Wilmington Trust Company, not in its individual capacity but solely as Subordination Agent, as Borrower, and ABN AMRO Bank N.V., acting through its Chicago Branch as Liquidity Provider.
58
EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.104 -- Revolving Credit Agreement (1998-1B), dated as of February 9, 1998, between Wilmington Trust Company, not in its individual capacity but solely as Subordination Agent, as Borrower, and Morgan Stanley Capital Services, Inc., as Liquidity Provider. 10.105 -- Revolving Credit Agreement (1998-1C), dated as of February 9, 1998, between Wilmington Trust Company, not in its individual capacity but solely as Subordination Agent, as Borrower, and Morgan Stanley Capital Services, Inc., as Liquidity Provider. 10.106 -- Guarantee, dated as of February 9, 1998, from Morgan Stanley, Dean Witter, Discover & Co. to Atlas Air, Inc. Pass Through Trust 1998-B relating to Class B Liquidity Facility. 10.107 -- Guarantee, dated as of February 9, 1998, from Morgan Stanley, Dean Witter, Discover & Co. to Atlas Air, Inc. Pass Through Trust 1998-C relating to Class C Liquidity Facility. 10.108 -- Intercreditor Agreement, dated as of February 9, 1998, among Wilmington Trust Company, not in its individual capacity but solely as Trustee, ABN AMRO Bank N.V., acting through its Chicago Branch, as Class A Liquidity Provider, Morgan Stanley Capital Services, Inc., as Class B Liquidity Provider and Class C Liquidity Provider, and Wilmington Trust Company. 10.109 -- Note Purchase Agreement, dated as of February 9, 1998, among the Company, Wilmington Trust Company and First Security Bank, National Association. 10.110 -- Employment Agreement dated as of February 16, 1998 between the Company and Stephen C. Nevin. 21.1 -- Subsidiaries of the Registrant. 27 -- Financial Data Schedule.
- --------------- + Incorporated by reference to the exhibits to the Company's Registration Statement on Form S-1 (No. 33-90304). ++ Incorporated by reference to the exhibits to the Company's Registration Statement on Form S-1 (No. 33-97892). * Incorporated by reference to the exhibits to the Company's Registration Statement on Form S-1 (No. 333-2810). ** Incorporated by reference to the exhibits to the Company's Registration Statement on Form S-4 (No. 333-36305). *** Incorporated by reference to the exhibits to the Company's Annual Report for 1996 on Form 10-K. **** Portions of this document, for which the Company has been granted confidential treatment, have been redacted and filed separately with the Securities and Exchange Commission. EX-10.88 2 PLACEMENT AGREEMENT 1 EXHIBIT 10.88 EXECUTION COPY ================================================================================ ATLAS AIR, INC., ISSUER Pass Through Certificates Series 1998-1 PLACEMENT AGREEMENT Dated: January 27, 1998 ================================================================================ 2 ATLAS AIR, INC., ISSUER Pass Through Certificates, Series 1998-1 PLACEMENT AGREEMENT January 27, 1998 Morgan Stanley & Co. Incorporated BT Alex. Brown Incorporated Donaldson, Lufkin & Jenrette Securities Corporation Goldman, Sachs & Co. c/o Morgan Stanley & Co. Incorporated 1585 Broadway New York, New York 10036 Dear Sirs: Atlas Air, Inc., a Delaware corporation (the "Company"), proposes that Wilmington Trust Company, as trustee under each of the Original Trusts (as defined below) (each, a "Trustee"), issue and sell to the placement agents named in Schedule II hereto its pass through certificates in the aggregate principal amounts and with the interest rates and final distribution dates set forth on Schedule I hereto (the "Offered Certificates") on the terms and conditions stated herein and in Schedule III. As used herein, unless the context otherwise requires, the term "Placement Agents" shall mean the firms named as Placement Agents in Schedule II, and the term "you" shall mean Morgan Stanley & Co. Incorporated ("Morgan Stanley"). The Offered Certificates will be issued pursuant to three separate pass through trust agreements, each to be dated as of February 9, 1998 (collectively, the "Original Pass Through Trust Agreements") between the Company and the Trustee. The Original Pass Through Trust Agreements are related to the creation and administration of Atlas Air, Inc. Pass Through Trust Series 1998-1A (the "Class A Trust"), Atlas Air, Inc. Pass Through Trust Series 1998-1B (the "Class B Trust") and Atlas Air, Inc. Pass Through Trust Series 1998-1C (the "Class C Trust"; and together with the Class A Trust and the Class B Trust, the "Original Trusts"). The cash proceeds of the offering of Offered Certificates by each Original Trust will be paid to First Security Bank, National Association, as escrow agent (the "Escrow Agent"), under an Escrow and Paying Agent Agreement among the Escrow Agent, 3 the Placement Agents, the Trustee of such Original Trust and Wilmington Trust Company, as paying agent (the "Paying Agent"), for the benefit of the holders of Offered Certificates issued by such Original Trust (each, an "Escrow Agreement"). The Escrow Agent will deposit such cash proceeds (each, a "Deposit") with ABN AMRO Bank N.V., acting through its Chicago branch (the "Depositary"), in accordance with a Deposit Agreement relating to such Original Trust (each, a "Deposit Agreement"), and will withdraw Deposits upon request to allow the Trustee to purchase Equipment Notes (as defined in the Note Purchase Agreement referred to herein) referred to herein from time to time pursuant to a Note Purchase Agreement to be dated as of the Closing Date (the "Note Purchase Agreement") among the Company, Wilmington Trust Company, as Trustee of each of the Original Trusts, as Subordination Agent (as hereinafter defined) and as Paying Agent, and the Escrow Agent. Each Escrow Agent will issue receipts to be attached to each related Offered Certificate ("Escrow Receipts") representing each holder's fractional undivided interest in amounts deposited with such Escrow Agent and will pay to such holders through the related Paying Agent interest accrued on the Deposits and received by such Paying Agent pursuant to the related Deposit Agreement at a rate per annum equal to the interest rate applicable to the corresponding Offered Certificates. On the earlier of (i) the first Business Day after June 30, 1999, or, if later, the fifth Business Day after the Delivery Period Termination Date (as defined in the Note Purchase Agreement) and (ii) the fifth Business Day after the occurrence of a Triggering Event (as defined in the Intercreditor Agreement) (such Business Day, the "Trust Transfer Date"), each of the Original Trusts will transfer and assign all of its assets and rights to a newly-created successor trust with substantially identical terms except as described in the Offering Memorandum (as hereinafter defined) (each, a "Successor Trust" and, together with the Original Trusts, the "Trusts") governed by three separate pass through trust agreements (collectively the "Successor Pass Through Trust Agreements" and, together with the Original Pass Through Trust Agreements, the "Designated Agreements") between the Company and the Trustee. Each Offered Certificate outstanding on the Trust Transfer Date will represent the same interest in the Successor Trust as the Offered Certificate represented in the Original Trust. Wilmington Trust Company initially will also act as trustee of the Successor Trusts (each, a "Successor Trustee"). Certain amounts of interest payable on the Offered Certificates will be entitled to the benefits of separate liquidity facilities. ABN AMRO Bank N.V., acting through its Chicago branch, in the case of the Class A Trust (in such capacity, the "Class A Liquidity Provider") and Morgan Stanley Capital Services, Inc., in the case of the Class B Trust and the Class C Trust (the "Class B and C Liquidity Provider" and, together with the Class A Liquidity Provider, the "Liquidity Providers") will enter into separate revolving credit agreements with respect to each Original Trust (each, a "Liquidity Facility") to be dated as of the Closing Date for the benefit of the holders of the Offered Certificates. The Liquidity Providers and the holders of the Offered Certificates will be entitled to the benefits of an Intercreditor Agreement to be dated as of the Closing Date (the "Intercreditor Agreement") 2 4 among the Trustees, Wilmington Trust Company, as subordination agent and trustee thereunder (the "Subordination Agent"), and the Liquidity Providers. The Offered Certificates will be offered without being registered under the Securities Act of 1933, as amended (the "Securities Act"), in reliance on exemptions therefrom. Each Placement Agent and its direct and indirect transferees will be entitled to the benefits of a Registration Rights Agreement (the "Registration Rights Agreement"), to be dated the Closing Date (as defined below) and to be substantially in the form attached hereto as Exhibit A, pursuant to which the Company will file a registration statement (the "Registration Statement") with the Securities and Exchange Commission (the "Commission") registering the Exchange Certificates referred to in such Registration Rights Agreement (the "Exchange Certificates") or the Offered Certificates under the Securities Act. In connection with the sale of the Offered Certificates, the Company has prepared a preliminary offering memorandum (the "Preliminary Memorandum") and will prepare a final offering memorandum (the "Final Memorandum" and, with the Preliminary Memorandum, each, a "Memorandum") setting forth or including a description of the terms of the Offered Certificates, the terms of the offering and a description of the Company and its business. Capitalized terms not otherwise defined in this Agreement shall have the meanings specified therefor in the Original Pass Through Trust Agreements or in the Note Purchase Agreement or the Intercreditor Agreement referred to in the Designated Agreements; provided that, as used in this Agreement, the term "Operative Agreements" shall mean the Deposit Agreements, the Escrow Agreements, the Intercreditor Agreement, the Liquidity Facilities, the Designated Agreements, the Registration Rights Agreement and the Financing Agreements (as defined in the Intercreditor Agreement). 1. Representations and Warranties. (a) The Company represents and warrants to, and agrees with each Placement Agent that: (i) The Preliminary Memorandum does not contain and the Final Memorandum, in the form used by the Placement Agent to confirm sales and on the Closing Date, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. The preceding sentence does not apply to statements in or omissions from either Memorandum based upon written information furnished to the Company by any Placement Agent through Morgan Stanley expressly for use therein ("Placement Agent Information"). The Company hereby confirms that it has authorized the use of both of the Memoranda in connection with the offer and resale of the Certificates by the Placement Agents. 3 5 (ii) The Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in each Memorandum and to perform its obligations under this Agreement and the Operative Documents to which it is, or is to be, a party; the Company is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole (an "Atlas Material Adverse Effect"). (iii) The Company's only subsidiaries are Atlas One, Inc., Atlas Freighter Leasing, Inc., Atlas Freighter Leasing II, Inc., Atlas Air Services Limited, LHC Properties, Inc., Atlas Flightlease, Inc. and Genessee Insurance Company, Ltd. (collectively, the "Subsidiaries"). Each Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation with corporate power and authority under such laws to own, lease and operate its properties and conduct its business; and each Subsidiary is duly qualified to transact business as a foreign corporation and is in good standing in each other jurisdiction in which it owns or leases property of a nature, or transacts business of a type, that would make such qualification necessary, except to the extent that the failure to so qualify or be in good standing would not have an Atlas Material Adverse Effect. All of the outstanding shares of capital stock of each Subsidiary have been duly authorized and validly issued and are fully paid and non-assessable and are owned by the Company free and clear of any pledge, lien, security interest, charge, claim, equity or encumbrance of any kind. (iv) This Agreement has been duly authorized, executed and delivered by the Company. The Operative Agreements to which the Company is or will be a party will be duly executed and delivered by the Company on or prior to the Closing Date or the applicable Transfer Date, as the case may be. (v) The Operative Agreements to which the Company is, or is to be, a party, have each been duly authorized by the Company, are or will be substantially in the form heretofore supplied to you and, assuming that such Operative Agreements have been duly authorized, executed and delivered by, and constitute the legal, valid and binding obligations of, each other party thereto, when duly executed and delivered by the Company will constitute valid and binding obligations of the Company, except (x) as enforcement thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, (y) as enforcement thereof may be limited by general equitable principles (regardless of whether enforcement is considered in a proceeding in equity or at law) and (z) as that enforcement of rights to indemnification and contribution thereunder may be limited (i) with respect to the Registration Rights Agreement, by Federal or state securities laws or (ii) by principles of public policy. The Offered Certificates, the Equipment Notes, the Indentures, the Leases 4 6 and other Operative Agreements to which the Company is, or is to be, a party will conform in all material respects to the descriptions thereof in the Final Memorandum. (vi) The Company is a "citizen of the United States" (as defined in Section 40102(a)(15) of Title 49 of the United States Code, as amended) and is an air carrier operating under a certificate issued by the Secretary of Transportation pursuant to Chapter 447 of Title 49, United States Code, for aircraft capable of carrying 10 or more individuals or 6,000 pounds or more of cargo. There is in force with respect to the Company an air carrier operating certificate issued pursuant to Part 121 of the regulations under the sections of Title 49, United States Code, relating to aviation (the "Federal Aviation Act"). All of the outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid and non-assessable. (vii) Assuming the due authorization of the Offered Certificates by the Trustee, when executed, authenticated, issued and delivered in the manner provided for in the related Original Pass Through Trust Agreement and sold and paid for as provided in this Agreement, each of the Offered Certificates will be valid and binding obligations of the Trustee entitled to the benefits of the related Original Pass Through Trust Agreement, enforceable against the Trustee in accordance with its terms, except as limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally and general equitable principles (whether considered in a proceeding in equity or at law); upon the execution and delivery of the Assignment and Assumption Agreements in accordance with the Original Pass Through Trust Agreements, the Offered Certificates will be legally and validly outstanding under the related Successor Pass Through Trust Agreements; and when executed, authenticated, issued and delivered in the manner provided for in the Escrow Agreements, the Escrow Receipts will be legally and validly issued and will be entitled to the benefits of the related Escrow Agreements. (viii) The execution and delivery by the Company of this Agreement and the Operative Documents to which the Company is, or is to be, a party, the consummation by the Company of the transactions contemplated in this Agreement and such Operative Documents, and compliance by the Company with the terms of this Agreement and such Operative Documents will not contravene (i) the certificate of incorporation or by-laws of the Company, (ii) any provision of applicable law or any agreement or other instrument binding upon the Company or any of the Subsidiaries, except for such contraventions as would not, singly or in the aggregate, have an Atlas Material Adverse Effect, or (iii) any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any Subsidiary, and no consent, approval, authorization or order of, or qualification with, any governmental body or agency is required for the valid authorization, execution, delivery and performance by the Company of this Agreement and the Operative Documents to which the Company is, or is to be, a party, or the consummation by the Company of the transactions contemplated by this Agreement and such Operative Documents, except (x) such as may be required by the securities or Blue Sky laws of the various states in 5 7 connection with the offer and sale of the Offered Certificates and the Equipment Notes, (y) such as may be required under the Securities Act, the Trust Indenture Act or rules of the National Association of Securities Dealers in connection with the registration of the Offered Certificates or the Exchange Certificates under the Securities Act pursuant to the Registration Rights Agreement and (z) filings or recordings with the Federal Aviation Administration (the "FAA") and under the Uniform Commercial Code as in effect in Colorado and Utah, which filings or recordings referred to in this clause (z), with respect to any particular set of Financing Agreements, shall have been made, or duly presented for filing or recordation, on or prior to the applicable Transfer Date for the Aircraft related to such Financing Agreements. (ix) There has not occurred any material adverse change, or any development involving a prospective material adverse change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and the Subsidiaries, taken as a whole, from that set forth in the Final Memorandum. (x) Except as accurately described in all material respects in each Memorandum and except as would not have an Atlas Material Adverse Effect and would not materially and adversely affect the ability of the Company to perform its obligations under this Agreement or any Operative Documents, to which it is, or is to be, a party, or to consummate the transactions contemplated by the Final Memorandum there are no legal or governmental proceedings pending or, to the best knowledge of the Company, threatened to which the Company or any of the Subsidiaries is or may be a party or to which any of the properties of the Company or any of the Subsidiaries is or may be subject. (xi) Except as described in the Final Memorandum, the Company is not in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, loan agreement, note, lease or other agreement or instrument to which it is a party or by which it may be bound or to which any of its properties may be subject, except for such defaults that would not have an Atlas Material Adverse Effect. (xii) The Company and the Subsidiaries each has good and marketable title to all properties and assets described in the Final Memorandum as owned by it, free and clear of all liens, charges, encumbrances or restrictions, except (A) as described in the Final Memorandum or (B) as would not have an Atlas Material Adverse Effect. (xiii) Except as described in the Final Memorandum, no labor problem exists with the Company's employees or with employees of any Subsidiary or, to the best knowledge of the Company, is imminent that could reasonably be expected to have an Atlas Material Adverse Effect, and the Company is not aware of any existing or imminent labor disturbance by the employees of any of its or any subsidiary's principal contractors or customers that could reasonably be expected to have an Atlas Material Adverse Effect. 6 8 (xiv) The Company and the Subsidiaries (i) are in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws"), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, singly or in the aggregate, have an Atlas Material Adverse Effect. (xv) Neither the Company nor any affiliate (as defined in Rule 501(b) of Regulation D under the Securities Act, an "Affiliate") of the Company has directly, or through any agent, (i) sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any security (as defined in the Securities Act) which is or will be integrated with the sale of the Offered Certificates in a manner that would require the registration under the Securities Act of the Offered Certificates or (ii) engaged in any form of general solicitation or general advertising in connection with the offering of the Offered Certificates (as those terms are used in Regulation D under the Securities Act) or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act. The Company has not entered and will not enter into any contractual arrangement with respect to the distribution of the Offered Certificates, except for this Agreement. (xvi) None of the Company, its Affiliates or any person acting on its or their behalf (other than the Placement Agents, as to which the Company makes no representation) has engaged in any directed selling efforts (as that term is defined in Regulation S under the Securities Act ("Regulation S")) with respect to the Offered Certificates and the Company and its Affiliates and any person acting on its or their behalf (other than the Placement Agents as to which the Company makes no representation) have complied with the offering restrictions requirement of Regulation S. (xvii) The Company is subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). (xviii) The Offered Certificates satisfy the eligibility requirements of Rule 144A(d)(3) under the Securities Act. (xix) It is not necessary in connection with the offer, sale and delivery of the Offered Certificates to the Placement Agents pursuant to this Agreement to register the Offered Certificates under the Securities Act or to qualify any of the Indentures or Designated Agreements under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). 7 9 (xx) Neither the Company nor any of the Original Trusts is, nor will any of the Successor Trusts be as of the execution and delivery of the Assignment and Assumption Agreements in accordance with the Original Pass Through Trust Agreements, an "investment company" within the meaning of the Investment Company Act of 1940, as amended (the "Investment Company Act"), in each case required to register under the Investment Company Act; and after giving effect to the offering and sale of the Offered Certificates and the application of the proceeds thereof as described in the Final Memorandum, none of the Original Trusts or, as of the execution and delivery of the Assignment and Assumption Agreements in accordance with the Original Pass Through Trust Agreements, the Successor Trusts will be an "investment company" as defined in the Investment Company Act, nor will the escrow arrangements contemplated by the Escrow Agreement result in the creation of, an "investment company" as defined in the Investment Company Act, in each case required to register under the Investment Company Act. (xxi) The accountants that examined and issued an auditors report with respect to the consolidated financial statements of the Company and its consolidated subsidiaries included in the Final Memorandum are independent public accountants within the meaning of the Securities Act and the regulations thereunder. (xxii) The consolidated financial statements included in the Final Memorandum present fairly the consolidated financial position of the Company and its consolidated subsidiaries as of the dates indicated and the consolidated results of operations and cash flows or changes in financial position of the Company and its consolidated subsidiaries for the periods specified. Such financial statements have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved. The financial statement schedules, if any, included in the Final Memorandum present fairly the information required to be stated therein. (xxiii) The Company and the Subsidiaries possess adequate certificates, authorities and permits issued by appropriate governmental agencies or bodies necessary to conduct, in all material respects, the business now operated by them and have not received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit that would, individually or in the aggregate, have an Atlas Material Adverse Effect. (xxiv) No Appraiser is an affiliate of the Company or has a substantial interest, direct or indirect, in the Company. None of the officers and directors of any of such Appraisers are connected with the Company or any of its affiliates as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions. (b) The parties agree that any certificate signed by a duly authorized officer of the Company and delivered to a Placement Agent, or to counsel for the Placement Agents, on the Closing Date and in connection with this Agreement or the offering of the Offered 8 10 Certificates, shall be deemed a representation and warranty by (and only by) the Company to the Placement Agents as to the matters covered thereby. The representations and warranties contained in this Agreement shall be true and correct as of the date of this Agreement and as of the Closing Date. 2. Purchase, Sale and Delivery of Offered Certificates. (a) On the basis of the representations, warranties and agreements herein contained, but subject to the terms and the conditions herein set forth, the Company agrees to cause the Trustees to sell to each Placement Agent, and each Placement Agent agrees, severally and not jointly, to purchase from the Trustees, at a purchase price of 100% of the principal amount thereof, the aggregate principal amount of Offered Certificates of each Pass Through Certificate Designation set forth opposite the name of such Placement Agent in Schedule II. Concurrently with the issuance of the Offered Certificates, the Escrow Agents shall issue and deliver to the Trustees the Escrow Receipts in accordance with the terms of the Escrow Agreements, which Escrow Receipts shall be attached to the related Offered Certificates. (b) The Company is advised by you that the Placement Agents propose to make an offering of the Offered Certificates purchased by the Placement Agents hereunder on the terms to be set forth in the Final Memorandum as soon as practicable after this Agreement has been entered into as in your judgment is advisable. (c) As compensation to the Placement Agents for their respective commitments and obligations hereunder in respect of the Offered Certificates, including their respective undertakings to distribute the Offered Certificates, the Company will pay to each Placement Agent an amount equal to that percentage of the aggregate principal amount of Offered Certificates purchased by such Placement Agent (as set forth in Schedule II). Such payment will be made on the Closing Date simultaneously with the issuance and sale of the Offered Certificates (with attached Escrow Receipts) to the Placement Agents. Payment of such compensation shall be made by Federal funds check or other immediately available funds. (d) Delivery of and payment for the Offered Certificates (with attached Escrow Receipts) shall be made at the offices of Shearman & Sterling at 599 Lexington Avenue, New York, New York 10022-6069 at 10:00 A.M. on February 9, 1998 or such other date, time and place as may be agreed upon by the Company and you (such date and time of delivery and payment for the Offered Certificates (with attached Escrow Receipts) being herein called the "Closing Date"). Delivery of the Offered Certificates (with attached Escrow Receipts) issued by each Original Trust shall be made to your account at The Depository Trust Company ("DTC") for the respective accounts of the several Placement Agents against payment by the Placement Agents of the purchase price thereof. Payment for the Offered Certificates issued by each Original Trust and the related Escrow Receipts attached thereto shall be made by the Placement Agents by wire transfer of immediately available funds to the accounts and in the manner specified in the related Escrow 9 11 Agreements. The Offered Certificates (with attached Escrow Receipts) issued by each Original Trust shall be in the form of one or more fully registered global certificates, and shall be deposited with the related Trustee as custodian for DTC and registered in the name of Cede & Co. (e) The Company agrees to have the Offered Certificates (with attached Escrow Receipts) available for inspection and checking by you in New York, New York not later than 1:00 P.M. on the business day prior to the Closing Date. (f) It is understood that each Placement Agent has authorized you for its account, to accept delivery of, receipt for, and make payment of the purchase price for, the Offered Certificates (with attached Escrow Receipts) that it has agreed to purchase. You, individually and not as a representative, may (but shall not be obligated to) make payment of the purchase price for the Offered Certificates to be purchased by any Placement Agent whose check or checks shall not have been received by the Closing Date. 3. Conditions to Closing. The obligations of the Placement Agents under this Agreement to purchase the Offered Certificates will be subject to the following conditions: (a) Subsequent to the date of this Agreement and prior to the Closing Date, (i) there shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading or of any review for a possible change that does not indicate the direction of the possible change, in the rating accorded any of the Company's securities, including the Offered Certificates, by any "nationally recognized statistical rating organization", as such term is defined for purposes of Rule 436(g)(2) under the Securities Act; and (ii) there shall not have occurred any change, or any development involving a prospective change, in the condition, financial or otherwise, or in the earnings, business or operations, of the Company and its subsidiaries, taken as a whole, from that set forth in the Final Memorandum (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement) that, in your judgment, is material and adverse and that makes it, in your judgment, impracticable to market the Offered Certificates on the terms and in the manner contemplated in the Final Memorandum. (b) You shall have received on the Closing Date a certificate, dated the Closing Date and signed by an executive officer of the Company, to the effect set forth in clause (a)(i) above and to the effect that the representations and warranties of the Company contained in this Agreement are true and correct as of the Closing Date and that the Company has complied with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied on or before the Closing Date. 10 12 The officer signing and delivering such certificate may rely upon the best of his knowledge as to proceedings threatened. (c) At the Closing Date, the Registration Rights Agreement, attached as Exhibit A hereto, shall have been duly executed, delivered and be in full force and effect. (d) On the Closing Date, you shall have received an opinion of Cahill Gordon & Reindel, as counsel for the Company, dated the Closing Date, to the effect set forth in Exhibit B hereto. (e) On the Closing Date, you shall have received an opinion of David Brictson, in-house legal counsel of the Company, dated the Closing Date, to the effect set forth in Exhibit C hereto. (f) On the Closing Date, you shall have received an opinion of Morris, James, Hitchens & Williams, counsel for Wilmington Trust Company, individually and as Trustee, Subordination Agent and Paying Agent, dated the Closing Date, to the effect set forth in Exhibit D hereto. (g) On the Closing Date, you shall have received an opinion of Ray, Quinney & Nebeker, counsel for the Escrow Agent, dated the Closing Date, to the effect set forth in Exhibit E hereto. (h) On the Closing Date, you shall have received (i) an opinion of Vedder, Price, Kaufman & Kammholz, U.S. counsel for the Class A Liquidity Provider, dated the Closing Date, to the effect set forth in Exhibit F- 1 hereto; (ii) an opinion of Clifford Chance, Netherlands counsel for the Class A Liquidity Provider, dated the Closing Date, to the effect set forth in Exhibit F-2 hereto; (iii) an opinion of in-house legal counsel for the Class B and C Liquidity Provider, dated the Closing Date, to the effect set forth in Exhibit F-3 hereto; and (iv) an opinion of Shearman & Sterling, counsel for the Placement Agents, dated the Closing Date, to the effect set forth in Exhibit F-4 hereto. (i) On the Closing Date, you shall have received (i) an opinion of Vedder, Price, Kaufman & Kammholz, U.S. counsel for the Depositary, dated the Closing Date, to the effect set forth in Exhibit G-1 hereto, and (ii) an opinion of Clifford Chance, Netherlands counsel for the Depositary, dated the Closing Date, to the effect set forth in Exhibit G-2 hereto. (j) On the Closing Date, you shall have received an opinion of Shearman & Sterling, counsel for the Placement Agents, dated the Closing Date, in form and substance satisfactory to you. 11 13 (k) You shall have received on each of the date hereof and the Closing Date a letter, dated the date hereof or the Closing Date, as the case may be, in form and substance satisfactory to you, from the Company's independent public accountants, containing statements and information of the type ordinarily included in accountants' "comfort letters" to underwriters with respect to the financial statements and certain financial information contained in each Memorandum; provided, that the letter delivered on the Closing Date shall use a "cut-off date" not earlier than the date hereof. (l) The Company shall have furnished to you and to counsel for the Placement Agents, in form and substance satisfactory to you, such other documents, certificates and opinions as such counsel may reasonably request in order to pass upon the matters referred to in Section 3(d) and in order to evidence the accuracy and completeness of any of the representations, warranties or statements, the performance of any covenant by the Company theretofore to be performed, or the compliance with any of the conditions herein contained. (m) Each of the Appraisers shall have furnished to the Placement Agents a letter from such Appraiser, addressed to the Company and dated the Closing Date, confirming that such Appraiser and each of its directors and officers (i) is not an affiliate of the Company or any of its affiliates, (ii) does not have any substantial interest, direct or indirect, in the Company or any of its affiliates and (iii) is not connected with the Company or any of its affiliates as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions. (n) At the Closing Date, each of the Operative Agreements (other than the Indentures, Leases and Participation Agreements) shall have been duly executed and delivered by each of the parties thereto; the representations and warranties of the Company contained in each of such executed Operative Agreements shall be true and correct as of the Closing Date (except to the extent that they relate solely to an earlier date, in which case they shall be true and correct as of such earlier date) and the Placement Agents shall have received a certificate of the President or a Vice President of the Company, dated as of the Closing Date, to such effect. The Company agrees to furnish to the Placement Agents, promptly after the Closing Date and the applicable Transfer Date as defined in the applicable Financing Agreement, a copy of each opinion required to be delivered under the applicable Participation Agreement addressed to the Placement Agents and of such other documents furnished in connection with the fulfillment of the conditions precedent therein as the Placement Agents or counsel for the Placement Agents may reasonably request. (o) On the Closing Date, the Offered Certificates shall be rated "A3" in the case of the Offered Certificates of the Class A Trust, "Baa3" in the case of the Offered Certificates of the Class B Trust, and "Ba3" in the case of the Offered Certificates of the Class C Trust by Moody's Investors Service, Inc.; "AA-" in the case of the Offered Certificates of the Class A Trust, "A-" in the case of the Offered Certificates of the Class B Trust, and "BBB-" in the case of the Offered Certificates of the Class C Trust by Standard & 12 14 Poor's Ratings Services; and "AA-" in the case of the Offered Certificates of the Class A Trust, "A-" in the case of the Offered Certificates of the Class B Trust, and "BBB-" in the case of the Offered Certificates of the Class C Trust by Fitch IBCA, Inc. (p) On or before the Closing Date, the Company shall have furnished the Placement Agents with such conformed copies of such opinions, certificates, letters and documents as the Placement Agents may reasonably request. 5. Covenants of the Company. In further consideration of the agreements of the Placement Agents contained in this Agreement, the Company covenant as follows: (a) To deliver to each Placement Agent, without charge, from time to time, as many copies of the Preliminary Memorandum as such Placement Agent may reasonably request, and the Company hereby consents to the use of such copies for purposes permitted by the Securities Act. The Company will deliver to each Placement Agent, without charge, copies of the Final Memorandum in New York City, prior to 10:00 a.m., local time, on the business day next succeeding the date of this Agreement, and thereafter from time to time as requested during the period mentioned in paragraph (c) below, such number of copies of the Final Memorandum (as supplemented or amended) as such Placement Agent may reasonably request. (b) Before amending or supplementing either Memorandum, to furnish to you a copy of each such proposed amendment or supplement and not to use any such proposed amendment or supplement to which you reasonably object. (c) If, during such period after the date hereof and prior to the date on which all of the Offered Certificates shall have been sold by the Placement Agents, any event shall occur or condition exist as a result of which it is necessary in your judgment to amend or supplement the Final Memorandum in order to make the statements therein, in the light of the circumstances when such Memorandum is delivered to a purchaser, not misleading, or if, with the opinion of counsel to the Placement Agents it is necessary to amend or supplement such Memorandum to comply with applicable law, forthwith to prepare and furnish, at their own expense, to the Placement Agents, either amendments or supplements to such Memorandum so that the statements in such Memorandum as so amended or supplemented will not, in the light of the circumstances when such Memorandum is delivered to a purchaser, be misleading or so that such Memorandum, as so amended or supplemented, will comply with applicable law. (d) To endeavor to qualify the Offered Certificates for offer and sale under the securities or Blue Sky laws of such jurisdictions as you shall reasonably request. (e) Whether or not the transactions contemplated in this Agreement are consummated or this Agreement is terminated, to pay or cause to be paid all expenses 13 15 incident to the performance of their obligations under this Agreement, including: (i) the fees, disbursements and expenses of the Company's counsel and the Company's accountants in connection with the issuance and sale of the Offered Certificates and all other fees or expenses in connection with the preparation of each Memorandum and all amendments and supplements thereto, including all printing costs associated therewith, and the delivering of copies thereof to the Placement Agents, in the quantities herein above specified, (ii) all costs and expenses related to the transfer and delivery of the Offered Certificates to the Placement Agents, including any transfer or other taxes payable thereon, (iii) the costs of printing or producing any Blue Sky or legal investment memorandum in connection with the offer and sale of the Offered Certificates under state securities laws as provided in Section 5(d) hereof, including filing fees and the reasonable fees and disbursements of counsel for the Placement Agents in connection with such qualification and in connection with the Blue Sky or legal investment memorandum, (iv) any fees charged by ratings agencies for the rating of the Offered Certificates, (v) the reasonable fees and disbursements of the Indenture Trustee, the Subordination Agent, the Trustees and their counsel, (vi) the cost of the preparation, issuance and delivery of the Offered Certificates and (vii) all other costs and expenses incident to the performance of the obligations of the Company hereunder for which provision is not otherwise made in this Section. It is understood, however, that except as provided in this Section, Section 7 and the last paragraph of Section 10, the Placement Agents will pay all of their costs and expenses, including fees and disbursements of their counsel, transfer taxes payable on resale of any of the Offered Certificates by them and any advertising expenses connected with any offers they may make. (f) Neither the Company nor any Affiliate will sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in the Securities Act) which could be integrated with the sale of the Offered Certificates in a manner which would require the registration under the Securities Act of such Offered Certificates. (g) Not to solicit any offer to buy or offer or sell the Offered Certificates by means of any form of general solicitation or general advertising (as those terms are used in Regulation D under the Securities Act) or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act. (h) While any of the Offered Certificates remain "restricted securities" within the meaning of the Securities Act, to make available, upon request, to any seller of such Offered Certificates the information specified in Rule 144A(d)(4) under the Securities Act, unless the Company is then subject to Section 13 or 15(d) of the Exchange Act. (i) None of the Company, its Affiliates or any person acting on its or their behalf (other than the Placement Agents as to whom the Company makes no 14 16 covenant) will engage in any directed selling efforts (as that term is defined in Regulation S) with respect to the Offered Certificates, and the Company and its Affiliates and each person acting on its or their behalf (other than the Placement Agents, as to whom the Company makes no covenant) will comply with the offering restrictions of Regulation S. (j) For a period of three years after the Closing Date, to make available to the Placement Agents, copies of all annual reports, quarterly reports and current reports filed by the Company with the Securities and Exchange Commission (the "Commission") on Forms 10-K, 10-Q and 8-K, or such other similar forms as may be designated by the Commission, and such other documents, reports and information as shall be furnished by the Company to the holders of Offered Certificates or to its security holders generally; provided that at such time the Company has securities registered under Section 12(b) or 12(g) of the Exchange Act. (k) During the period of two years after the Closing Date, upon request, to furnish to the Placement Agents and any holder of Offered Certificates a copy of the restrictions on transfer applicable to the Offered Certificates. (l) During the period of two years after the Closing Date, the Company will not, and will not permit any of its affiliates (as defined in Rule 144 under the Securities Act) to, resell any of the Offered Certificates which constitute "restricted securities" under Rule 144A that have been reacquired by any of them. (m) During the period of two years after the Closing Date, not to or become an open-end investment company, unit investment trust or face-amount certificate company that is or is required to be registered under Section 8 of the Investment Company Act, or a closed-end investment company required to be registered, but not registered, under the Investment Company Act. (n) In connection with the offering, until the Placement Agent shall have notified the Company of the completion of the resale of the Offered Certificates, neither the Company nor any of its Affiliates has bid for or purchased or will bid for or purchase, either alone or with one or more other persons, for any account in which it or any of its affiliates has a beneficial interest any Offered Certificates; and neither it nor any of its affiliates will make bids or purchases for the purpose of creating actual, or apparent, active trading in, or of raising the price of, the Offered Certificates. (o) Between the date of this Agreement and the Closing Date, the Company will not without your prior written consent offer, sell, or enter into any agreement to sell, any public debt securities registered under the Securities Act or any debt securities which may be resold in a transaction exempt from the registration requirements of the Securities Act in reliance on Rule 144A thereunder and which are 15 17 marketed through the use of a disclosure document containing substantially the same information as a prospectus for similar debt securities registered under the Securities Act (other than the Offered Certificates). 6. Offering of Offered Certificates; Restrictions on Transfer. (a) Each of the Placement Agents represents and warrants that it is a qualified institutional buyer as defined in Rule 144A under the Securities Act (a "QIB"). Each of the Placement Agents agrees with the Company that (i) it will not solicit offers for, or offer or sell, such Offered Certificates by any form of general solicitation or general advertising (as those terms are used in Regulation D under the Securities Act) or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act and (ii) it will solicit offers for such Offered Certificates only from, and will offer such Offered Certificates only to, persons that it reasonably believes to be (A) in the case of offers inside the United States, (x) QIBs or (y) other institutional accredited investors (as defined in Rule 501(a) (1), (2), (3) or (7) under the Securities Act) ("institutional accredited investors") that, prior to their purchase of the Offered Certificates, delivers to such Placement Agent a letter containing the representations and agreements set forth in Appendix III to the Final Memorandum and (B) in the case of offers outside the United States, to persons other than U.S. persons ("foreign purchasers", which term shall include dealers or other professional fiduciaries in the United States acting on a discretionary basis for foreign beneficial owners (other than an estate or trust)) that, in each case, in purchasing such Offered Certificates are deemed to have represented and agreed as provided in the Final Memorandum under the caption "Transfer Restrictions". (b) Each of the Placement Agents represents, warrants, and agrees with respect to offers and sales outside the United States that: (i) it understands that no action has been or will be taken in any jurisdiction by the Company that would permit a public offering of the Offered Certificates, or possession or distribution of either Memorandum or any other offering or publicity material relating to the Offered Certificates, in any country or jurisdiction where action for that purpose is required; (ii) it will comply with all applicable laws and regulations in each jurisdiction in which it acquires, offers, sells or delivers Offered Certificates or has in its possession or distributes either Memorandum or any such other material, in all cases at its own expense; (iii) the Offered Certificates have not been and will not be registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Regulation S under the Securities Act or pursuant to an exemption from the registration requirements of the Securities Act; 16 18 (iv) it has offered the Offered Certificates and will offer and sell the Offered Certificates (A) as part of its distribution at any time and (B) otherwise until 40 days after the later of the commencement of the offering of the Offered Certificates and the Closing Date, only in accordance with Rule 903 of Regulation S or another exemption from the registration requirements of the Securities Act. Accordingly, neither the Placement Agent, its Affiliates nor any persons acting on its or their behalf have engaged or will engage in any directed selling efforts (within the meaning of Regulation S) with respect to the Offered Certificates, and any the Placement Agent, its Affiliates and any such persons have complied and will comply with the offering restrictions requirements of Regulation S; (v) it has not offered or sold and will not offer or sell any Offered Certificates to persons in the United Kingdom prior to the expiring of the period six months from the issue date of the Offered Certificates except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995 (the "Regulations"); (B) has complied and will comply with all applicable provisions of the Financial Services Act 1986 and the Regulations with respect to anything done by it in relation to the Offered Certificates in, from or otherwise involving the United Kingdom; and (C) has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issue of the Offered Certificates to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 or is a person to whom such document may otherwise lawfully be issued or passed on; (vi) it understands that the Offered Certificates have not been and will not be registered under the Securities and Exchange Law of Japan, and represents that it has not offered or sold, and agrees that it will not offer or sell, any Offered Certificates, directly or indirectly in Japan or to any resident of Japan except (A) pursuant to an exemption from the registration requirements of the Securities and Exchange Law of Japan and (B) in compliance with any other applicable requirements of Japanese law; (vii) it agrees that, at or prior to confirmation of sales of the Offered Certificates, it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Offered Certificates from it during the restricted period a confirmation or notice to substantially the following effect: "The Securities covered hereby have not been registered under the U.S. Securities Act of 1933 (the "Securities Act") and may not be offered or sold 17 19 within the United States or to, or for the account or benefit of, U.S. persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering and the closing date, except in either case in accordance with Regulation S (or Rule 144A if available) under the Securities Act. Terms used above have the meanings given to them by Regulation S." Terms used in this Section 6 have the meanings given to them by Regulation S. 7. Indemnification and Contribution. (a) The Company agrees to indemnify and hold harmless each Placement Agent, and each person, if any, who controls any Placement Agent within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, or is under common control with, or is controlled by, any Placement Agent, from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred by any Placement Agent or any such controlling or affiliated person in connection with defending or investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in either Memorandum (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto), or caused by any omission or alleged omission to state therein a material fact necessary to make the statements therein in light of the circumstances under which they were made not misleading, except insofar as such losses, claims, damages or liabilities incurred by any Placement Agent are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to the Placement Agents (and, in the case of such losses, claims, damages or liabilities incurred by Morgan Stanley, by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to the Class B and C Liquidity Provider or to Morgan Stanley, Dean Witter, Discover & Co.) furnished to the Company in writing by the Placement Agents through you expressly for use therein; provided, however, that the foregoing indemnity agreement with respect to the Preliminary Memorandum shall not inure to the benefit of any Placement Agent from whom the person asserting any such losses, claims, damages or liabilities purchased Offered Certificates, or any person controlling such Placement Agent, if a copy of the Final Memorandum (as then amended or supplemented if the Company shall have furnished any amendments thereto) was not sent or given by or on behalf of such Placement Agent to such person, if required by law so to have been delivered, at or prior to the written confirmation of the sale of the Offered Certificates, and the Final Memorandum (as so amended or supplemented) would have cured the defect giving rise to such losses, claims, damages or liabilities, unless such failure is the result of noncompliance by the Company with Section 5(a) hereof. (b) The Placement Agents agree, severally and not jointly, to indemnify and hold harmless the Company, each of its directors, its officers and each person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the 18 20 Company to the Placement Agents, but only with reference to information relating to the Placement Agents furnished to the Company in writing by the Placement Agents through you expressly for use in either Memorandum or any amendments or supplements thereto. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to any of paragraph (a) or (b) above, such person (the "indemnified party") shall promptly notify the person against whom such indemnity may be sought (the "indemnifying party") in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all such indemnified parties and that all such fees and expenses shall be reimbursed as they are incurred. Such firm shall be designated in writing by Morgan Stanley & Co. Incorporated in the case of parties indemnified pursuant to paragraph (a) above and by the Company in the case of parties indemnified pursuant to paragraph (b) above. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second and third sentences of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 60 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (d) To the extent the indemnification provided for in paragraph (a) or (b) of this Section 7 is unavailable to an indemnified party or insufficient in respect of any 19 21 losses, claims, damages or liabilities, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Placement Agents on the other hand from the offering of such Offered Certificates or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and the Placement Agents on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Placement Agents on the other hand in connection with the offering of such Offered Certificates shall be deemed to be in the same respective proportions as (in the case of the Company) the net proceeds from the offering of such Offered Certificates (before deducting expenses) received by the Trusts and (in the case of the Placement Agents) the total discounts and commissions received by the Placement Agents in respect of the Offered Certificates bear to the aggregate offering price of such Offered Certificates. The relative fault of the Company, on the one hand, and the Placement Agents, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Placement Agents and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Placement Agents' respective obligations to contribute pursuant to this Section 7 are several in proportion to the respective principal amount of Offered Certificates they have purchased hereunder, and not joint. (e) The Company and the Placement Agents agree that it would not be just or equitable if contribution pursuant to this Section 7 were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) above. The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 7, the Placement Agents shall not be required to contribute any amount in excess of the amount by which the total price at which the Offered Certificates resold by it in the initial placement of such Offered Certificates were offered to investors exceeds the amount of any damages that the Placement Agents has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The indemnity and contribution provisions contained in this Section 7 and the representations and warranties of the Company contained in this Agreement shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, 20 22 (ii) any investigation made by or on behalf of the Placement Agents or any person controlling any Placement Agent, by or on behalf of the Company, its officers or directors or any person controlling the Company and (iii) acceptance of and payment for any of the Offered Certificates. The remedies provided for in this Section 7 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. 8. Termination. This Agreement shall be subject to termination by notice given by you to the Company, if (a) after the execution and delivery of this Agreement and prior to the Closing Date (i) trading generally shall have been suspended or materially limited on or by, as the case may be, any of the New York Stock Exchange, the American Stock Exchange, the National Association of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any securities of the Company shall have been suspended on any exchange or in any over-the-counter market, (iii) a general moratorium on commercial banking activities in New York shall have been declared by either Federal or New York State authorities or (iv) there shall have occurred any outbreak or escalation of hostilities or any change in financial markets or any calamity or crisis that, in your judgment, is material and adverse and (b) in the case of any of the events specified in clauses (a)(i) through (iv), such event singly or together with any other such event makes it, in your judgment, impracticable to market the Offered Certificates on the terms and in the manner contemplated in the Final Memorandum. 9. All notices and other communications under this Agreement shall be in writing, and, if sent to the Placement Agents, shall be mailed, delivered or sent by facsimile transmission to: Morgan Stanley & Co. Incorporated 1585 Broadway New York, New York 10036 Attention: Tom Cahill Facsimile number: (212) 761-0786 or, if sent to the Company, shall be mailed, delivered or sent by facsimile transmission to it at: Atlas Air, Inc. 538 Commons Drive Golden, Colorado 80401 Attention: Chief Financial Officer Facsimile number: (303) 526-5051 with a copy to: 21 23 Cahill Gordon & Reindel 80 Pine Street New York, New York 10005 Attention: Stephen A. Greene, Esq. Facsimile number: (212) 269-5420 10. This Agreement shall become effective upon the execution and delivery hereof by the parties hereto. If, on the Closing Date, any one or more of the Placement Agents shall fail or refuse to purchase Offered Certificates that it or they have agreed to purchase hereunder on such date, and the aggregate principal amount of Offered Certificates which such defaulting Placement Agent or Placement Agents agreed but failed or refused to purchase is not more than one-tenth of the aggregate principal amount of Offered Certificates to be purchased on such date, the other Placement Agents shall be obligated severally in the proportions that the principal amount of Offered Certificates set forth opposite their respective names in Schedule I bears to the aggregate principal amount of Offered Certificates set forth opposite the names of all such non-defaulting Placement Agents, or in such other proportions as you may specify, to purchase the Offered Certificates which such defaulting Placement Agent or Placement Agents agreed but failed or refused to purchase on such date; provided, that in no event shall the principal amount of Offered Certificates that any Placement Agent has agreed to purchase pursuant to this Agreement be increased pursuant to this Section 10 by an amount in excess of one-ninth of such principal amount of Offered Certificates without the written consent of such Placement Agent. If on the Closing Date any Placement Agent or Placement Agents shall fail or refuse to purchase Offered Certificates which it or they have agreed to purchase on such date and the aggregate principal amount of Offered Certificates with respect to which such default occurs is more than one-tenth of the aggregate principal amount of Offered Certificates to be purchased on such date, and arrangements satisfactory to you and the Company for the purchase of such Offered Certificates are not made within 36 hours after such default, this Agreement shall terminate without liability on the part of any non-defaulting Placement Agent or of the Company. In any such case either you or the Company shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Final Memorandum or in any other documents or arrangements may be effected. Any action taken under this paragraph shall not relieve any defaulting Placement Agent from liability in respect of any default of such Placement Agent under this Agreement. If this Agreement shall be terminated by the Placement Agents, or any of them, because of any failure or refusal on the part of the Company to comply with the terms or to fulfill any of the conditions of this Agreement, or if for any reason the Company shall be unable to perform its obligations under this Agreement, the Company will reimburse the Placement Agents or such Placement Agents as have so terminated this Agreement with respect to themselves, severally, for all out-of-pocket expenses (including the fees and 22 24 disbursements of their counsel) reasonably incurred by such Placement Agents in connection with this Agreement or the offering contemplated hereunder. 11. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York. The headings of the sections of this Agreement have been inserted for convenience of reference only and shall not be deemed a part of this Agreement. 23 25 Please confirm your agreement to the foregoing by signing in the space provided below for that purpose and returning to us a copy hereof, whereupon this Agreement shall constitute a binding agreement between us. Very truly yours, ATLAS AIR, INC. By: /s/ RICHARD H. SYLE ------------------------------------ Name: Title: Agreed, January 27, 1998 MORGAN STANLEY & CO. INCORPORATED BT ALEX. BROWN INCORPORATED DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION GOLDMAN, SACHS & CO. By: MORGAN STANLEY & CO. INCORPORATED By: /s/ TOM CAHILL --------------------------------- Name: Title: 24 26 SCHEDULE I (Pass Through Certificates, Series 1998-1) ATLAS AIR, INC.
Pass Through Aggregate Final Expected Certificate Principal Interest Distribution Designation Amounts Rate Date ----------------- ------------- ---------- ------------------ 1998-1A $300,254,000 7.38% 01/02/18 1998-1B $115,481,000 7.68% 01/02/14 1998-1C $123,180,000 8.01% 01/02/10
27 SCHEDULE II (Pass Through Certificates, Series 1998-1) ATLAS AIR, INC.
Placement Agent 1997-1A 1997-1B 1997-1C --------------- ------- ------- ------- Morgan Stanley & Co. Incorporated $75,065,000 $28,871,000 $30,795,000 BT Alex. Brown Incorporated 75,063,000 28,870,000 30,795,000 Donaldson, Lufkin & Jenrette Securities Corporation 75,063,000 28,870,000 30,795,000 Goldman, Sachs & Co. 75,063,000 28,870,000 30,795,000 ---------------------------------------------------- Total: $300,254,000 $115,481,000 $123,180,000 ====================================================
Underwriting fees, discounts, commissions or other compensation: $6,197,523. This sum represents 1.15% of the aggregate principal amount of the Offered Certificates. 26 28 EXHIBIT A FORM OF REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered into February __, 1998, among ATLAS AIR, INC., a Delaware corporation (the "Company"), MORGAN STANLEY & CO. INCORPORATED ("Morgan Stanley"), BT ALEX. BROWN INCORPORATED, DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION and GOLDMAN, SACHS & CO. (collectively with Morgan Stanley, the "Placement Agents"). This Agreement is made pursuant to the Placement Agreement dated January 26, 1998, among the Company and the Placement Agents (the "Placement Agreement"), which provides for the sale by the Trustee (as defined below) to the Placement Agents of (i) $300,254,000 aggregate principal amount of 7.38% 1998-1A Pass Through Certificates (the "Class A Certificates"), (ii) $115,481,000 aggregate principal amount of 7.68% 1998-1B Pass Through Certificates (the "Class B Certificates") and (iii) $123,180,000 aggregate principal amount of 8.01% 1998-1C Pass Through Certificates (the "Class C Certificates, and together with the Class A Certificates and the Class B Certificates, the "Certificates"). In order to induce the Placement Agents to enter into the Placement Agreement, the Company has agreed to provide to the Placement Agents and their direct and indirect transferees the registration rights set forth in this Agreement. The execution of this Agreement is a condition to the closing under the Placement Agreement. The Certificates will be issued pursuant to three separate pass through trust agreements, each to be dated as of February __, 1998 (collectively the "Original Pass Through Trust Agreements") between the Company and Wilmington Trust Company, as trustee under each of the Original Trusts (as defined below) (each a "Trustee"). The Original Pass Through Trust Agreements are related to the creation and administration of Atlas Air, Inc. Pass Through Trust Series 1998-1A (the "Class A Trust"), Atlas Air, Inc. Pass Through Trust Series 1998-1B (the "Class B Trust") and Atlas Air, Inc. Pass Through Trust Series 1998-1C (the "Class C Trust"; and together with the Class A Trust and the Class B Trust and the Class C Trust, the "Original Trusts"). The cash proceeds of the offering of Certificates by each Original Trust will be paid to First Security Bank, National Association., as escrow agent (the "Escrow Agent"), under an Escrow and Paying Agent Agreement among the Escrow Agent, the Placement Agents, the Trustee of such Original Trust and Wilmington Trust Company, as paying agent (the "Paying Agent"), for the benefit of the holders of Offered Certificates issued by such Original Trust. The Escrow Agent will deposit such cash proceeds (each, a "Deposit") with the Depositary, in accordance with a Deposit Agreement relating to such Original Trust (each, a "Deposit Agreement"), and will withdraw Deposits upon request to allow the 29 A-2 Trustee to purchase Equipment Notes (as defined in the Note Purchase Agreement defined below) referred to herein from time to time pursuant to a Note Purchase Agreement (the "Note Purchase Agreement") to be dated as of the Closing Date (as defined in the Placement Agreement) among the Company, Wilmington Trust Company, as Trustee of each of the Original Trusts, as Subordination Agent and as Paying Agent, and the Escrow Agent. Each Escrow Agent will issue receipts to be attached to each related Certificate representing each holder's fractional undivided interest in amounts deposited with such Escrow Agent and will pay to such holders through the related Paying Agent interest accrued on the Deposits and received by such Paying Agent pursuant to the related Deposit Agreement at a rate per annum equal to the interest rate applicable to the corresponding Certificates. On the Trust Transfer Date (as defined in the Placement Agreement), each of the Original Trusts will transfer and assign all of its assets and rights to a newly-created successor trust with substantially identical terms except as described in the Final Memorandum (as defined in the Placement Agreement) (each, a "Successor Trust" and, together with the Original Trusts, the "Trusts") governed by three separate pass through trust agreements (collectively the "Successor Pass Through Trust Agreements" and, together with the Original Pass Through Trust Agreements, the "Trust Agreements") between the Company and the Trustee. Each Certificate outstanding on the Trust Transfer Date will represent the same interest in the Successor Trust as the Certificate represented in the Original Trust. Wilmington Trust Company initially will also act as trustee of the Successor Trusts (each, a "Successor Trustee"). In consideration of the foregoing, the parties hereto agree as follows: 1. Definitions. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "1933 Act" shall mean the Securities Act of 1933, as amended from time to time. "1934 Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. "Agreement" shall have the meaning set forth in the preamble. "Applicable Trust Agreement" shall mean, (i) with respect to the Class A Certificates, the Class A Holders or the Class A Trustee, the Class A Trust Agreement, (ii) with respect to the Class B Certificates, the Class B Holders or the Class B Trustee, the Class B Trust Agreement and (iii) with respect to the Class C 30 A-3 Certificates, the Class C Holders or the Class C Trustee, the Class C Trust Agreement. "Certificates" shall have the meaning set forth in the second paragraph of this Agreement. "Class A Certificates" shall have the meaning set forth in the second paragraph of this Agreement. "Class A Exchange Certificates" shall mean securities issued under the Class A Trust Agreement of equal outstanding principal amount as and containing terms identical to the Class A Certificates (except that (i) interest thereon shall accrue from the last date on which interest was paid on the Class A Certificates or, if no such interest has been paid, from February __, 1998, (ii) the transfer restrictions thereon shall be modified or eliminated, as appropriate and (iii) certain provisions relating to an increase in the stated rate of interest thereon shall be eliminated), to be offered to Holders of the Class A Certificates in exchange for such Class A Certificates pursuant to the Exchange Offer. "Class A Holder" shall mean each Placement Agent, for so long as it owns any Class A Registrable Certificates, and each of its successors, assigns and direct and indirect transferees who become registered owners of Class A Registrable Certificates under the Class A Trust Agreement; provided that for purposes of Sections 4 and 5 of this Agreement, the term "Class A Holder" shall include Participating Broker-Dealers (as defined in Section 4(a)). "Class A Registrable Certificates" shall mean the Class A Certificates; provided, however, that the Class A Certificates shall cease to be Class A Registrable Certificates upon the earlier to occur of (i) the consummation of the Exchange Offer, (ii) a Registration Statement with respect to such Class A Certificates shall have been declared effective under the 1933 Act and such Class A Certificates shall have been disposed of pursuant to such Registration Statement, (iii) such Class A Certificates shall have been sold to the public pursuant to Rule 144(k) (or any similar provision then in force, but not Rule 144A) under the 1933 Act or (iv) such Class A Certificates shall have ceased to be outstanding. "Class A Trust Agreement" shall mean the Pass Through Trust Agreement relating to the Class A Certificates dated as of February __, 1998 between the Company and the Class A Trustee or, on or after the Trust Transfer Date, the corresponding Successor Pass Through Trust Agreement, as each may be amended from time to time in accordance with the terms thereof. 31 A-4 "Class A Trustee" shall mean Wilmington Trust Company, not in its individual capacity except as expressly set forth in the Class A Trust Agreement, but solely as Trustee under the Class A Trust Agreement, together with any successor Trustee under the terms of the Class A Trust Agreement. "Class B Certificates" shall have the meaning set forth in the second paragraph of this Agreement. "Class B Exchange Certificates" shall mean securities issued under the Class B Trust Agreement of equal outstanding principal amount as and containing terms identical to the Class B Certificates (except that (i) interest thereon shall accrue from the last date on which interest was paid on the Class B Certificates or, if no such interest has been paid, from February __, 1998, (ii) the transfer restrictions thereon shall be modified or eliminated, as appropriate and (iii) certain provisions relating to an increase in the stated rate of interest thereon shall be eliminated), to be offered to Holders of the Class B Certificates in exchange for such Class B Certificates pursuant to the Exchange Offer. "Class B Holder" shall mean each Placement Agent, for so long as it owns any Class B Registrable Certificates, and each of its successors, assigns and direct and indirect transferees who become registered owners of Class B Registrable Certificates under the Class B Trust Agreement; provided that for purposes of Sections 4 and 5 of this Agreement, the term "Class B Holder" shall include Participating Broker-Dealers (as defined in Section 4(a)). "Class B Registrable Certificates" shall mean the Class B Certificates; provided, however, that the Class B Certificates shall cease to be Class B Registrable Certificates upon the earlier to occur of (i) the consummation of the Exchange Offer, (ii) a Registration Statement with respect to such Class B Certificates shall have been declared effective under the 1933 Act and such Class B Certificates shall have been disposed of pursuant to such Registration Statement, (iii) such Class B Certificates shall have been sold to the public pursuant to Rule 144(k) (or any similar provision then in force, but not Rule 144A) under the 1933 Act or (iv) such Class B Certificates shall have ceased to be outstanding. "Class B Trust Agreement" shall mean the Pass Through Trust Agreement relating to the Class B Certificates dated as of February __, 1998 between the Company and the Class B Trustee or, on or after the Trust Transfer Date, the corresponding Successor Pass Through Trust Agreement, as each may be amended from time to time in accordance with the terms thereof. 32 A-5 "Class B Trustee" shall mean Wilmington Trust Company, not in its individual capacity except as expressly set forth in the Class B Trust Agreement, but solely as Trustee under the Class B Trust Agreement, together with any successor Trustee under the terms of the Class B Trust Agreement. "Class C Certificates" shall have the meaning set forth in the second paragraph of this Agreement. "Class C Exchange Certificates" shall mean securities issued under the Class C Trust Agreement of equal outstanding principal amount as and containing terms identical to the Class C Certificates (except that (i) interest thereon shall accrue from the last date on which interest was paid on the Class C Certificates or, if no such interest has been paid, from February __, 1998, (ii) the transfer restrictions thereon shall be modified or eliminated, as appropriate and (iii) certain provisions relating to an increase in the stated rate of interest thereon shall be eliminated), to be offered to Holders of the Class C Certificates in exchange for such Class C Certificates pursuant to the Exchange Offer. "Class C Holder" shall mean each Placement Agent, for so long as it owns any Class C Registrable Certificates, and each of its successors, assigns and direct and indirect transferees who become registered owners of Class C Registrable Certificates under the Class C Trust Agreement; provided that for purposes of Sections 4 and 5 of this Agreement, the term "Class C Holder" shall include Participating Broker-Dealers (as defined in Section 4(a)). "Class C Registrable Certificates" shall mean the Class C Certificates; provided, however, that the Class C Certificates shall cease to be Class C Registrable Certificates upon the earlier to occur of (i) the consummation of the Exchange Offer, (ii) a Registration Statement with respect to such Class C Certificates shall have been declared effective under the 1933 Act and such Class C Certificates shall have been disposed of pursuant to such Registration Statement, (iii) such Class C Certificates shall have been sold to the public pursuant to Rule 144(k) (or any similar provision then in force, but not Rule 144A) under the 1933 Act or (iv) such Class C Certificates shall have ceased to be outstanding. "Class C Trust Agreement" shall mean the Pass Through Trust Agreement relating to the Class C Certificates dated as of February __, 1998 between the Company and the Class C Trustee or, on or after the Trust Transfer Date, the corresponding Successor Pass Through Trust Agreement, as each may be amended from time to time in accordance with the terms thereof. 33 A-6 "Class C Trustee" shall mean Wilmington Trust Company, not in its individual capacity except as expressly set forth in the Class C Trust Agreement, but solely as Trustee under the Class C Trust Agreement, together with any successor Trustee under the terms of the Class C Trust Agreement. "Closing Date" shall mean the Closing Date as defined in the Placement Agreement. "Company" shall have the meaning set forth in the preamble and shall also include the Company's successors. "Deposit" shall have the meaning set forth in the fourth paragraph of this Agreement. "Deposit Agreement" shall have the meaning set forth in the fourth paragraph of this Agreement. "Depositary" shall have the meaning set forth in the preamble and shall also include the Depositary's successors. "Escrow Agent" shall have the meaning set forth in the fourth paragraph of this Agreement and shall also include the Escrow Agent's successors. "Exchange Offer" shall mean the exchange offer by the Company of Exchange Certificates for Registrable Certificates pursuant to Section 2(a) hereof. "Exchange Offer Registration" shall mean a registration under the 1933 Act effected pursuant to Section 2(a) hereof. "Exchange Offer Registration Statement" shall mean an exchange offer registration statement on Form S-4 (or, if applicable, on another appropriate form) and all amendments and supplements to such registration statement, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Exchange Certificates" shall mean, together, the Class A Exchange Certificates, the Class B Exchange Certificates and the Class C and Exchange Certificates. "Exchange Dates" shall have the meaning set forth in Section 2(a)(ii) of this Agreement. 34 A-7 "Holder" shall mean a Class A Holder, a Class B Holder or a Class C Holder; provided that for purposes of Sections 4 and 5 of this Agreement, the term "Holder" shall include Participating Broker-Dealers (as defined in Section 4(a)). "Majority Holders" shall mean, together, the Holders of a majority in aggregate principal amount of the of Registrable Certificates then outstanding; provided that whenever the consent or approval of Holders of a specified percentage of Registrable Certificates is required hereunder, Registrable Certificates held by the Company or any of its affiliates (as such term is defined in Rule 405 under the 1933 Act) (other than the Placement Agents or subsequent holders of Registrable Certificates if such subsequent holders are deemed to be such affiliates solely by reason of their holding of such Registrable Certificates) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage or amount. "Morgan Stanley" shall have the meaning set forth in the preamble. "Note Purchase Agreement" shall have the meaning set forth in the fourth paragraph of this Agreement. "Original Pass Through Trust Agreements" shall have the meaning set forth in the third paragraph of this Agreement. "Paying Agent" shall have the meaning set forth in the fourth paragraph of this Agreement and shall also include the Paying Agent's successors. "Person" shall mean an individual, partnership, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. "Placement Agents" shall have the meaning set forth in the preamble. "Placement Agreement" shall have the meaning set forth in the second paragraph of this Agreement. "Prospectus" shall mean the prospectus included in a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including a prospectus supplement with respect to the terms of the offering of any portion of the Registrable Certificates covered by a Shelf Registration Statement, and by all other amendments and supplements to such prospectus, and in each case including all material incorporated by reference therein. 35 A-8 "Registrable Certificates" shall mean, together, the Class A Registrable Certificates, the Class B Registrable Certificates and the Class C Registrable. "Registration Expenses" shall mean any and all expenses incident to performance of or compliance by the Company with this Agreement, including without limitation: (i) all SEC, stock exchange or National Association of Securities Dealers, Inc. registration and filing fees, (ii) all fees and expenses incurred in connection with compliance with state securities or blue sky laws (including reasonable fees and disbursements of counsel for any underwriters or Holders in connection with blue sky qualification of any of the Exchange Certificates or Registrable Certificates), (iii) all expenses in connection with the printing and distributing of any Registration Statement, any Prospectus and any amendments or supplements thereto, (iv) all rating agency fees, (v) all fees and disbursements relating to the qualification of the Trust Agreements under applicable securities laws, (vi) the fees and disbursements of the Trustees and their counsel, (vii) the fees and disbursements of counsel for the Company and, in the case of a Shelf Registration Statement, the fees and disbursements of one counsel for the Holders (which counsel shall be selected by the Majority Holders and which counsel may also be counsel for the Placement Agents) and (viii) the fees and disbursements of the independent public accountants of the Company, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, but excluding fees and expenses of counsel to the underwriters (other than fees and expenses set forth in clause (ii) above) or the Holders and underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of Registrable Certificates by a Holder. "Registration Statement" shall mean any registration statement of the Company that covers any of the Exchange Certificates or Registrable Certificates pursuant to the provisions of this Agreement and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "SEC" shall mean the Securities and Exchange Commission. "Shelf Registration" shall mean a registration effected pursuant to Section 2(b) hereof. "Shelf Registration Statement" shall mean a "shelf" registration statement of the Company pursuant to the provisions of Section 2(b) of this Agreement which covers all of the Registrable Certificates (but no other securities unless approved by the Holders whose Registrable Certificates are covered by such Shelf Registration 36 A-9 Statement) on an appropriate form under Rule 415 under the 1933 Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Successor Pass Through Trust Agreements" shall have the meaning set forth in the fifth paragraph of this Agreement. "Successor Trust" shall have the meaning set forth in the fifth paragraph of this Agreement. "Successor Trustee" shall have the meaning set forth in the fifth paragraph of this Agreement and shall also include the Successor Trustee's successors. "TIA" shall have the meaning set forth in Section 3(l) of this Agreement. "Trust Agreement" shall have the meaning set forth in the fifth paragraph of this Agreement. "Trustee" shall have the meaning set forth in the third paragraph of this Agreement and shall also include the Trustee's successors. "Underwritten Registration" or "Underwritten Offering" shall mean a registration in which Registrable Certificates are sold to an Underwriter (as hereinafter defined) for reoffering to the public. 2. Registration Under the 1933 Act. (a) To the extent not prohibited by any applicable law or applicable interpretation of the Staff of the SEC, the Company shall use its best efforts (i) to cause to be filed after the Closing Date an Exchange Offer Registration Statement covering the offer to the Holders to exchange (A) all of the Class A Registrable Certificates for Class A Exchange Certificates, (B) all of the Class B Registrable Certificates for Class B Exchange Certificates, (C) all of the Class C Registrable Certificates for Class C Exchange Certificates (ii) to have such Registration Statement remain effective until the closing of the Exchange Offer. The Company shall commence the Exchange Offer promptly after the Exchange Offer Registration Statement has been declared effective by the SEC and use its best efforts to have the Exchange Offer consummated not later than 60 days after such effective date. The Company shall, or shall cause the Trustees to, commence the Exchange Offer by mailing the related exchange offer Prospectus and accompanying documents to each Holder stating, in addition to such other disclosures as are required by applicable law: 37 A-10 (i) that the Exchange Offer is being made pursuant to this Registration Rights Agreement and that all Registrable Certificates validly tendered will be accepted for exchange; (ii) the dates of acceptance for exchange (which shall be each business day during a period of at least 30 days from the date such notice is mailed) (the "Exchange Dates"); (iii) that any Registrable Certificate not tendered will remain outstanding and continue to accrue interest, but will not retain any rights under this Registration Rights Agreement; (iv) that Holders electing to have a Registrable Certificate exchanged pursuant to the Exchange Offer will be required to surrender such Registrable Certificate, together with the enclosed letters of transmittal, to the institution and at the address (located in the Borough of Manhattan, The City of New York) specified in the notice prior to the close of business on the last Exchange Date; and (v) that Holders will be entitled to withdraw their election, not later than the close of business on the last Exchange Date, by sending to the institution and at the address (located in the Borough of Manhattan, The City of New York) specified in the notice, a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Registrable Certificates delivered for exchange, and a statement that such Holder is withdrawing his election to have such Certificates exchanged. As soon as practicable after the last Exchange Date, the Company shall or shall cause the Trustees to: (i) accept for exchange Registrable Certificates or portions thereof tendered and not validly withdrawn pursuant to the Exchange Offer; (ii) deliver, or cause to be delivered, to the Class A Trustee for cancellation all Class A Registrable Certificates or portions thereof so accepted for exchange by the Company, and issue, and cause the Class A Trustee to promptly authenticate and mail to each Class A Holder, Class A Exchange Certificates equal in principal amount to the principal amount of the Class A Registrable Certificates surrendered by such Class A Holder; (iii) deliver, or cause to be delivered, to the Class B Trustee for cancellation all Class B Registrable Certificates or portions thereof so accepted for exchange by the Company, and issue, and cause the Class B Trustee to promptly 38 A-11 authenticate and mail to each Class B Holder, Class B Exchange Certificates equal in principal amount to the principal amount of the Class B Registrable Certificates surrendered by such Class B Holder; and (iv) deliver, or cause to be delivered, to the Class C Trustee for cancellation all Class C Registrable Certificates or portions thereof so accepted for exchange by the Company, and issue, and cause the Class C Trustee to promptly authenticate and mail to each Class C Holder, Class C Exchange Certificates equal in principal amount to the principal amount of the Class C Registrable Certificates surrendered by such Class C Holder. The Company shall use its best efforts to complete the Exchange Offer as provided above and shall comply with the applicable requirements of the 1933 Act, the 1934 Act and other applicable laws, rules and regulations in connection with the Exchange Offer. The Exchange Offer shall not be subject to any conditions, other than that the Exchange Offer does not violate applicable law or any applicable interpretation of the Staff of the SEC. The Company shall inform the Placement Agents of the names and addresses of the Holders to whom the Exchange Offer is made, and the Placement Agents shall have the right, subject to applicable law, to contact such Holders and otherwise facilitate the tender of Registrable Certificates in the Exchange Offer. (b) In the event that (i) the Company determines that the Exchange Offer Registration provided for in Section 2(a) above is not available or may not be consummated as soon as practicable after the last Exchange Date because it would violate applicable law or the applicable interpretations of the Staff of the SEC, (ii) the Exchange Offer is not for any other reason consummated within 30 days of the effectiveness of an Exchange Offer Registration Statement or (iii) the Exchange Offer has been completed and in the opinion of counsel for the Placement Agents a Registration Statement must be filed and a Prospectus must be delivered by the Placement Agents in connection with any offering or sale of Registrable Certificates, the Company shall use its best efforts to cause to be filed as soon as practicable after such determination, date or notice of such opinion of counsel is given to the Company, as the case may be, a Shelf Registration Statement providing for the sale by the Holders of all of the Registrable Certificates, and to have such Shelf Registration Statement declared effective by the SEC. The Company agrees to use its best efforts to keep the Shelf Registration Statement continuously effective until the second anniversary of the Closing Date or such shorter period that will terminate when all of the Registrable Certificates covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement. The Company further agrees to supplement or amend the Shelf Registration Statement, if required by the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration Statement or by the 1933 Act or by any other rules and regulations thereunder for shelf registration or if reasonably requested by a Holder with respect to information relating to such Holder, and to use its best efforts to cause any such 39 A-12 amendment to become effective and such Shelf Registration Statement to become usable as soon as thereafter practicable. The Company agrees to furnish to the Holders of Registrable Certificates copies of any such supplement or amendment promptly after its being used or filed with the SEC. (c) The Company shall pay all Registration Expenses in connection with the registration pursuant to Section 2(a) or Section 2(b). Each Holder shall pay all underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder's Registrable Certificates pursuant to the Shelf Registration Statement. (d) An Exchange Offer Registration Statement pursuant to Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof will not be deemed to have become effective unless it has been declared effective by the SEC; provided, however, that if, after it has been declared effective, the offering of Registrable Certificates pursuant to a Shelf Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, such Shelf Registration Statement will be deemed not to have become effective during the period of such interference until the offering of Registrable Certificates pursuant to such Registration Statement may legally resume. In the event that neither the consummation of the Exchange Offer nor the declaration by the Commission of a Shelf Registration to be effective (each a "Registration Event") occurs on or prior to the 180th day after the date of the issuance of the Registrable Certificates, the interest rate per annum borne by the Certificates shall be increased by 0.50%, effective from and including August __, 1998, to but excluding the date on which a Registration Event occurs. In the event that the Shelf Registration Statement ceases to be effective at any time during the period specified by Section 2(b) hereof for more than 60 days, whether or not consecutive, during any 12-month period, the interest rate borne by the Certificates shall be increased by 0.50% per annum from the 61st day of the applicable 12-month period such Shelf Registration Statement ceases to be effective until such time as the Shelf Registration Statement again becomes effective. (e) Without limiting the remedies available to the Placement Agents and the Holders, the Company acknowledges that any failure by the Company to comply with its obligations under Section 2(a) and Section 2(b) hereof may result in material irreparable injury to the Placement Agents or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, each Placement Agent or any Holder may obtain such relief as may be required to specifically enforce the Company's obligations under Section 2(a) and Section 2(b) hereof. 40 A-13 3. Registration Procedures. In connection with the obligations of the Company with respect to the Registration Statements pursuant to Section 2(a) and Section 2(b) hereof, the Company shall as expeditiously as possible: (a) prepare and file with the SEC a Registration Statement on the appropriate form under the 1933 Act, which form (x) shall be selected by the Company and (y) shall, in the case of a Shelf Registration, be available for the sale of the Registrable Certificates by the selling Holders thereof and (z) shall comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the SEC to be filed therewith, and use its best efforts to cause such Registration Statement to become effective and remain effective in accordance with Section 2 hereof; (b) prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary to (x) keep such Registration Statement effective for the applicable period under this Registration Rights Agreement, and (y) cause each Prospectus to be supplemented by any required prospectus supplement and, as so supplemented, to be filed pursuant to Rule 424 under the 1933 Act and (z) keep each Prospectus current during the period described under Section 4(3) and Rule 174 under the 1933 Act that is applicable to transactions by brokers or dealers with respect to the Registrable Certificates or Exchange Certificates; (c) in the case of a Shelf Registration, furnish to each Holder of Registrable Certificates, to counsel for the Placement Agents, to counsel for the Holders and to each Underwriter of an Underwritten Offering of Registrable Certificates, if any, and each such Underwriter's Counsel, without charge, as many copies of each Prospectus, including each preliminary Prospectus, and any amendment or supplement thereto and such other documents as such Holder or Underwriter may reasonably request, in order to facilitate the public sale or other disposition of the Registrable Certificates; and the Company consents to the use of such Prospectus and any amendment or supplement thereto in accordance with applicable law by each of the selling Holders of Registrable Certificates and any such Underwriters in connection with the offering and sale of the Registrable Certificates covered by and in the manner described in such Prospectus or any amendment or supplement thereto in accordance with applicable law; (d) use its best efforts to register or qualify the Registrable Certificates under all applicable state securities or "blue sky" laws of such jurisdictions as any Holder of Registrable Certificates covered by a Registration Statement shall reasonably request in writing by the time the applicable Registration Statement is declared effective by the SEC, to cooperate with such Holders in connection with any 41 A-14 filings required to be made with the National Association of Securities Dealers, Inc. and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder to consummate the disposition in each such jurisdiction of such Registrable Certificates owned by such Holder; provided, however, that the Company shall not be required to (i) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (ii) file any general consent to service of process or (iii) subject itself to taxation in any such jurisdiction if it is not so subject; (e) in the case of a Shelf Registration, notify each Holder of Registrable Certificates, counsel for the Holders and counsel for the Placement Agents promptly and, if requested by any such Holder or counsel, confirm such advice in writing, (i) when a Registration Statement has become effective and when any post-effective amendment thereto have been filed and become effective, (ii) of any request by the SEC or any state securities authority for amendments and supplements to a Registration Statement and Prospectus or for additional information after the Registration Statement has become effective, (iii) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (iv) if, between the effective date of a Registration Statement and the closing of any sale of Registrable Certificates covered thereby, the representations and warranties of the Company contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to such offering cease to be true and correct in all material respects or if the Company receives any notification with respect to the suspension of the qualification of the Registrable Certificates for sale in any jurisdiction or the initiation of any proceeding for such purpose, (v) of the happening of any event during the period a Shelf Registration Statement is effective which makes any statement made in such Registration Statement or the related Prospectus untrue in any material respect or which requires the making of any changes in such Registration Statement or Prospectus in order to make the statements therein not misleading, and (vi) of any determination by the Company that a post-effective amendment to a Registration Statement would be appropriate; (f) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement at the earliest possible moment and provide immediate notice to each Holder of the withdrawal of any such order; (g) in the case of a Shelf Registration, furnish to each Holder of Registrable Certificates, without charge, at least one conformed copy of each 42 A-15 Registration Statement and any post-effective amendment thereto (without documents incorporated therein by reference or exhibits thereto, unless requested); (h) in the case of a Shelf Registration, cooperate with the selling Holders of Registrable Certificates to facilitate the timely preparation and delivery of certificates representing Registrable Certificates to be sold and not bearing any restrictive legends and enable such Registrable Certificates to be in such denominations (consistent with the provisions of the Applicable Trust Agreement) and registered in such names as the selling Holders may reasonably request at least two business days prior to the closing of any sale of Registrable Certificates; (i) in the case of a Shelf Registration, upon the occurrence of any event contemplated by Section 3(e)(v) hereof, use its best efforts to prepare and file with the SEC a supplement or post-effective amendment to a Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Certificates, such Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; the Company agrees to notify the Holders to suspend use of the Prospectus as promptly as practicable after the occurrence of such an event, and the Holders hereby agree to suspend use of the Prospectus until the Company has amended or supplemented the Prospectus to correct such misstatement or omission; (j) a reasonable time prior to the filing of any Registration Statement, any Prospectus, any amendment to a Registration Statement or amendment or supplement to a Prospectus or any document which is to be incorporated by reference into a Registration Statement or a Prospectus after initial filing of a Registration Statement, provide copies of such document to the Placement Agents and their counsel (and, in the case of a Shelf Registration Statement, the Holders and their counsel) and make such of the representatives of the Company as shall be reasonably requested by the Placement Agents or their counsel (and, in the case of a Shelf Registration Statement, the Holders or their counsel) available for discussion of such document, and shall not at any time file or make any amendment to the Registration Statement, any Prospectus or any amendment of or supplement to a Registration Statement or a Prospectus or any document which is to be incorporated by reference into a Registration Statement or a Prospectus, of which the Placement Agents and their counsel (and, in the case of a Shelf Registration Statement, the Holders and their counsel) shall not have previously been advised and furnished a copy or to which the Placement Agents or their counsel (and, in the case of a Registration Statement, the Holders or their counsel) shall object; 43 A-16 (k) obtain a CUSIP number for all Exchange Certificates or Registrable Certificates, as the case may be, not later than the effective date of a Registration Statement; (l) cause the Trust Agreements to be qualified under the Trust Indenture Act of 1939, as amended (the "TIA") in connection with the registration of the Exchange Certificates or Registrable Certificates, as the case may be, cooperate with the Trustees and the Holders to effect such changes to the Trust Agreements as may be required for the Trust Agreements to be so qualified in accordance with the terms of the TIA and execute, and use its best efforts to cause the Trustees to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the SEC to enable the Trust Agreements to be so qualified in a timely manner; (m) in the case of a Shelf Registration, make available for inspection by a representative of the Holders of the Registrable Certificates, any Underwriter participating in any disposition pursuant to such Shelf Registration Statement, and attorneys and accountants designated by the Holders, at reasonable times and in a reasonable manner, all financial and other records, pertinent documents and properties of the Company, and cause the respective officers, directors and employees of the Company to supply all information reasonably requested by any such representative, Underwriter, attorney or accountant in connection with a Shelf Registration Statement; (n) in the case of a Shelf Registration, use its best efforts to cause all Registrable Certificates to be listed on any securities exchange or any automated quotation system on which similar securities issued by the Company are then listed if requested by the Majority Holders, to the extent such Registrable Certificates satisfy applicable listing requirements; (o) use its best efforts to cause the Exchange Certificates or Registrable Certificates, as the case may be, to be rated by two nationally recognized statistical rating organizations (as such term is defined in Rule 436(g)(2) under the 1933 Act); (p) if reasonably requested by any Holder of Registrable Certificates covered by a Registration Statement, (i) promptly incorporate in a Prospectus supplement or post-effective amendment such information with respect to such Holder as such Holder reasonably requests to be included therein and (ii) make all required filings of such Prospectus supplement or such post-effective amendment as soon as the Company has received satisfactory notification of the matters to be incorporated in such filing; and 44 A-17 (q) in the case of a Shelf Registration, enter into such customary agreements and take all such other actions in connection therewith (including those requested by the Holders of a majority of the class of Registrable Certificates being sold) in order to expedite or facilitate the disposition of such Registrable Certificates including, but not limited to, an Underwritten Offering and in such connection, (i) to the extent possible, make such representations and warranties to the Holders and any Underwriters of such Registrable Certificates with respect to the business of the Company and its subsidiaries, the Registration Statement, Prospectus and documents incorporated by reference or deemed incorporated by reference, if any, in each case, in form, substance and scope as are customarily made by issuers to underwriters in underwritten offerings and confirm the same if and when requested, (ii) obtain opinions of counsel to the Company (which counsel and opinions, in form, scope and substance, shall be reasonably satisfactory to the Holders and such Underwriters and their respective counsel) addressed to each selling Holder and Underwriter of Registrable Certificates, covering the matters customarily covered in opinions requested in underwritten offerings, (iii) obtain "cold comfort" letters from the independent certified public accountants of the Company (and, if necessary, any other certified public accountant of any subsidiary of the Company, or of any business acquired by the Company for which financial statements and financial data are or are required to be included in the Registration Statement) addressed to each selling Holder and Underwriter of Registrable Certificates, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings, and (iv) deliver such documents and certificates as may be reasonably requested by the Holders of a majority in principal amount of the Registrable Certificates being sold or the Underwriters, and which are customarily delivered in underwritten offerings, to evidence the continued validity of the representations and warranties of the Company made pursuant to clause (i) above and to evidence compliance with any customary conditions contained in an underwriting agreement. In the case of a Shelf Registration Statement, the Company may require each Holder of Registrable Certificates to furnish to the Company such information regarding the Holder and the proposed distribution by such Holder of such Registrable Certificates as the Company may from time to time reasonably request in writing. In the case of a Shelf Registration Statement, each Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(e)(v) hereof, such Holder will forthwith discontinue disposition of Registrable Certificates pursuant to a Shelf Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(i) hereof, and, if so directed by the Company, such Holder will deliver to the Company (at the Company's expense) all copies in its possession, other than permanent file copies then in such Holder's 45 A-18 possession, of the Prospectus covering such Registrable Certificates current at the time of receipt of such notice. If the Company shall give any such notice to suspend the disposition of Registrable Certificates pursuant to a Registration Statement, the Company shall extend the period during which the Registration Statement shall be maintained effective pursuant to this Registration Rights Agreement by the number of days during the period from and including the date of the giving of such notice to and including the date when the Holders shall have received copies of the supplemented or amended Prospectus necessary to resume such dispositions. The Company may give any such notice only twice during any 365 day period and any such suspensions may not exceed 30 days for each suspension and there may not be more than two suspensions in effect during any 365 day period. The Holders of Registrable Certificates covered by a Shelf Registration Statement who desire to do so may sell such Registrable Certificates in an Underwritten Offering. In any such Underwritten Offering, the investment banker or investment bankers and manager or managers (the "Underwriters") that will administer the offering will be selected by the Majority Holders of the Registrable Certificates included in such offering. 4. Participation of Broker-Dealers in Exchange Offer. (a) The Staff of the SEC has taken the position that any broker-dealer that receives Exchange Certificates for its own account in the Exchange Offer in exchange for Certificates that were acquired by such broker-dealer as a result of market making or other trading activities (a "Participating Broker-Dealer") may be deemed to be an "underwriter" within the meaning of the 1933 Act and must deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of such Exchange Certificates. The Company understands that it is the Staff's position that if the Prospectus contained in the Exchange Offer Registration Statement includes a plan of distribution containing a statement to the above effect and the means by which Participating Broker-Dealers may resell the Exchange Certificates, without naming the Participating Broker-Dealers or specifying the amount of Exchange Certificates owned by them, such Prospectus may be delivered by Participating Broker-Dealers to satisfy their prospectus delivery obligation under the 1933 Act in connection with resales of Exchange Certificates for their own accounts, so long as the Prospectus otherwise meets the requirements of the 1933 Act. (b) In light of Section 4(a) above, notwithstanding the other provisions of this Registration Rights Agreement, the Company agrees that the provisions of this Registration Rights Agreement as they relate to a Shelf Registration shall also apply to an Exchange Offer Registration to the extent, and with such reasonable modifications thereto as may be reasonably requested by the Placement Agents or by one or more Participating Broker-Dealers, in each case as provided in clause (ii) below, in order to expedite or 46 A-19 facilitate the disposition of any Exchange Certificates by Participating Broker-Dealers consistent with the positions of the Staff recited in Section 4(a) above; provided that: (i) the Company shall not be required to amend or supplement the Prospectus contained in the Exchange Offer Registration Statement, as would otherwise be contemplated by Section 3(i), for a period exceeding 180 days after the last Exchange Date (as such period may be extended pursuant to the penultimate paragraph of Section 3 of this Agreement) and Participating Broker-Dealers shall not be authorized by the Company to deliver and shall not deliver such Prospectus after such period in connection with the resales contemplated by this Section 4; and (ii) the application of the Shelf Registration procedures set forth in Section 3 of this Registration Rights Agreement to an Exchange Offer Registration, to the extent not required by the positions of the Staff of the SEC or the 1933 Act and the rules and regulations thereunder, will be in conformity with the reasonable request to the Company by the Placement Agents or with the reasonable request in writing to the Company by one or more broker-dealers who certify to the Placement Agents and the Company in writing that they anticipate that they will be Participating Broker-Dealers; provided that in connection with such application of the Shelf Registration procedures set forth in Section 3 to an Exchange Offer Registration, the Company shall be obligated (x) to deal only with one entity representing the Participating Broker-Dealers, which shall be Morgan Stanley unless it elects not to act as such representative, (y) to pay the fees and expenses of only one counsel representing the Participating Broker-Dealers, which shall be counsel to the Placement Agents unless such counsel elects not to so act, and (z) to cause to be delivered only one, if any, "cold comfort" letter with respect to the Prospectus in the form existing on the last Exchange Date and with respect to each subsequent amendment or supplement, if any, effected during the period specified in clause (i) above. (c) The Placement Agents shall have no liability to the Company or any Holder with respect to any request that it may make pursuant to Section 4(b) above. 5. Indemnification and Contribution. (a) The Company agrees to indemnify and hold harmless each Placement Agent, each Holder and each person, if any, who controls any Placement Agent or any Holder within the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act, or is under common control with, or is controlled by, any Placement Agent or any Holder, from and against all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred by any Placement Agent, any Holder or any such controlling or affiliated person in connection with defending or investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto) pursuant to which Exchange Certificates or Registrable 47 A-20 Certificates were registered under the 1933 Act, including all documents incorporated therein by reference, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or caused by any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto), or caused by any omission or alleged omission to state therein a material fact necessary to make the statements therein in light of the circumstances under which they were made not misleading, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to the Placement Agents or any Holder (and, in the case of such losses, claims, damages or liabilities incurred by Morgan Stanley, by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to Morgan Stanley Capital Services, Inc. or to Morgan Stanley, Dean Witter, Discover & Co.) furnished to the Company in writing by the Placement Agents or any selling Holder expressly for use therein, provided, however, that the foregoing indemnity agreement with respect to the Preliminary Memorandum shall not inure to the benefit of any Placement Agent from whom the person asserting any such losses, claims, damages or liabilities purchased Offered Certificates, or any person controlling such Placement Agent, if a copy of the Final Memorandum (as then amended or supplemented if the Company shall have furnished any amendments thereto) was not sent or given by or on behalf of such Placement Agent to such person, if required by law so to have been delivered, at or prior to the written confirmation of the sale of the Offered Certificates (as so amended or supplemented) would have cured the defect giving rise to such losses, claims, damages or liabilities, unless such failure is the result of noncompliance by the Company with Section 5(a) of the Placement Agreement. In connection with any Underwritten Offering permitted by Section 3, the Company will also indemnify the Underwriters, if any, selling brokers, dealers and similar securities industry professionals participating in the distribution, their officers and directors and each Person who controls such Persons (within the meaning of the 1933 Act and the 1934 Act) to the same extent as provided above with respect to the indemnification of the Holders, if requested in connection with any Registration Statement. (b) Each Holder agrees, severally and not jointly, to indemnify and hold harmless the Company, each Placement Agent, the other selling Holders and each of their respective directors, officers who sign the Registration Statement and each Person, if any, who controls the Company, any Placement Agent or any other selling Holder within the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act to the same extent as the foregoing indemnity from the Company to the Placement Agents and the Holders, but only with reference to information relating to such Holder furnished to the Company in writing by such Holder expressly for use in any Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto). 48 A-21 (c) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to either of paragraph (a) or paragraph (b) above, such person (the "indemnified party") shall promptly notify the person against whom such indemnity may be sought (the "indemnifying party") in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for (a) the fees and expenses of more than one separate firm (in addition to any local counsel) for the Placement Agents and all persons, if any, who control any Placement Agent within the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act, (b) the fees and expenses of more than one separate firm (in addition to any local counsel) for the Company, its directors, its officers who sign the Registration Statement and each person, if any, who controls the Company within the meaning of either such Section and (c) the fees and expenses of more than one separate firm (in addition to any local counsel) for all Holders and all persons, if any, who control any Holders within the meaning of either such Section, and that all such fees and expenses shall be reimbursed as they are incurred. In such case involving the Placement Agents and persons who control any Placement Agent, such firm shall be designated in writing by the Placement Agents. In such case involving the Holders and such persons who control Holders, such firm shall be designated in writing by the Majority Holders. In all other cases, such firm shall be designated by the Company. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent but, if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second and third sentences of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 60 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party for such fees and expenses of counsel in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect 49 A-22 of which such indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (d) If the indemnification provided for in paragraph (a) or paragraph (b) of this Section 4 is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect the relative fault of the indemnifying party or parties on the one hand and of the indemnified party or parties on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of the Company and the Holders shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Holders and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Holders' respective obligations to contribute pursuant to this Section 5(d) are several in proportion to the respective number of Registrable Certificates of such Holder that were registered pursuant to a Registration Statement. (e) The Company and each Holder agree that it would not be just or equitable if contribution pursuant to this Section 5 were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) above. The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 5, no Holder shall be required to indemnify or contribute any amount in excess of the amount by which the total price at which Registrable Certificates were sold by such Holder exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Section 5 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. The indemnity and contribution provisions contained in this Section 5 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of the Placement Agents, any Holder 50 A-23 or any person controlling any Placement Agent or any Holder, or by or on behalf of the Company, its officers or directors or any person controlling the Company, (iii) acceptance of any of the Exchange Certificates and (iv) any sale of Registrable Certificates pursuant to a Shelf Registration Statement. 6. Miscellaneous. (a) No Inconsistent Agreements. The Company has not entered into, and on or after the date of this Registration Rights Agreement will not enter into, any agreement which is inconsistent with the rights granted to the Holders of Registrable Certificates in this Registration Rights Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's other issued and outstanding securities under any such agreements. (b) Amendments and Waivers. The provisions of this Registration Rights Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Company has obtained the written consent of Holders of at least a majority in aggregate principal amount of the outstanding Registrable Certificates affected by such amendment, modification, supplement, waiver or consent; provided, however, that no amendment, modification, supplement, waiver or consents to any departure from the provisions of Section 5 hereof shall be effective as against any Holder of Registrable Certificates unless consented to in writing by such Holder. (c) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, telex, telecopier, or any courier guaranteeing overnight delivery (i) if to a Holder, at the most current address given by such Holder to the Company by means of a notice given in accordance with the provisions of this Section 6(c), which address initially is, with respect to the Placement Agents, the address set forth in the Placement Agreement, and (ii) if to the Company, initially at the Company's address set forth in the Placement Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 6(c). All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; and on the next business day if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands, or other communications shall be concurrently delivered by the person giving the same to each Trustee, at the address specified in the Applicable Trust Agreement. 51 A-24 (d) Successors and Assigns. This Registration Rights Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties, including, without limitation and without the need for an express assignment, subsequent Holders; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Certificates in violation of the terms of the Placement Agreement or the Trust Agreements. If any transferee of any Holder shall acquire Registrable Certificates, in any manner, whether by operation of law or otherwise, such Registrable Certificates shall be held subject to all of the terms of this Registration Rights Agreement, and by taking and holding such Registrable Certificates, such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Registration Rights Agreement and such Person shall be entitled to receive the benefits hereof. The Placement Agents (in their capacity as Placement Agents) shall have no liability or obligation to the Company with respect to any failure by any other Holder to comply with, or any breach by any other Holder of, any of the obligations of such other Holder under this Registration Rights Agreement. (e) Purchases and Sales of Certificates. The Company shall not, and shall use its best efforts to cause its affiliates (as defined in Rule 405 under the 1933 Act), not to purchase and then resell or otherwise transfer any Certificates. (f) Third Party Beneficiary. The Holders shall be third party beneficiaries to the agreements made hereunder and shall have the right to enforce such agreements directly to the extent they deem such enforcement necessary or advisable to protect their rights hereunder. (g) Counterparts. This Registration Rights Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Registration Rights Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) Governing Law. This Registration Rights Agreement shall be governed by and construed in accordance with the internal laws of the State of New York. (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. 52 A-25 (k) Trustees. The Trustees shall take such action as may be reasonably requested by the Company in connection with the Company satisfying its obligations arising under this Agreement. 53 IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above. ATLAS AIR, INC. By: ------------------------------------ Name: Title: Confirmed and accepted as of the date first above written: MORGAN STANLEY & CO. INCORPORATED BT ALEX. BROWN INCORPORATED DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION GOLDMAN, SACHS & CO. By: MORGAN STANLEY & CO. INCORPORATED By: ------------------------- Name: Title: 54 EXHIBIT B Form of Opinion of Cahill Gordon & Reindel, Counsel to the Company 55 [Form of Opinion of Cahill Gordon & Reindel] February , 1998 To Each of the Persons Listed on Schedule A Attached Hereto Ladies and Gentlemen: We have acted as special counsel to Atlas Air, Inc., a Delaware corporation ("Atlas"), in connection with the transactions contemplated by the Placement Agreement dated January , 1998 among Morgan Stanley & Co. Incorporated, BT Alex. Brown, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co. (collectively, the "Placement Agents") and Atlas (the "Placement Agreement"). Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Placement Agreement or, if not defined therein, the Intercreditor Agreement (as defined below). This opinion is furnished pursuant to Section 3(d) of the Placement Agreement. In arriving at the opinions expressed below, we have reviewed the following documents, each of which is dated as of the date hereof, except where otherwise indicated above or below: (a) an executed copy of the Placement Agreement, (b) an executed copy of the Note Purchase Agreement, (c) executed copies of the three Original Pass Through Trust Agreements, dated as of [ ], 1998, between Atlas and 56 -2- Wilmington Trust Company, as trustee, (the "Original Pass Through Trust Agreements") and executed copies of the three Successor Pass Through Trust Agreements, dated as of [ ], 1998, between Atlas and Wilmington Trust Company, as trustee, (the "Successor Pass Through Trust Agreements" and, collectively with the Original Pass Through Trust Agreements, the "Pass Through Trust Agreements"), (d) a form of each of the Atlas Air Series 1998-1A Pass Through Certificates (the "Class A Certificates"), the Atlas Air Series 1998-1B Pass Through Certificates (the "Class B Certificates") and the Atlas Air Series 1998-1C Pass Through Certificates (the "Class C Certificates" and, together with the Class A Certificates and the Class B Certificates, the "Pass Through Certificates"), such Pass Through Certificates to be issued under the corresponding Original Pass Through Trust Agreements, (e) an executed copy of the Intercreditor Agreement among the Trustees, ABN AMRO Bank N.V., acting through its Chicago branch, as Class A Liquidity Provider and Morgan Stanley Capital Services, Inc., as Class B and Class C Liquidity Provider, respectively (as defined therein), and Wilmington Trust Company, as Subordination Agent and trustee (the "Intercreditor Agreement"), (f) an executed copy of each of the three Revolving Credit Agreements between the Subordination Agent, as borrower, and ABN AMRO Bank N.V., acting through its Chicago branch, as liquidity provider with respect to Class A Certificates and Morgan Stanley Capital Services, Inc. as liquidity provider with respect to, the Class B Certificates and the Class C Certificates, (the "Liquidity Facilities"), (g) an executed copy of each of the three Escrow Agreements, (h) a form of each of the Atlas Air 1998-1A Escrow Receipts (the "Class A Escrow Receipts"), the Atlas Air 1998-1B Escrow Receipts, (the "Class B Escrow Receipts") and the Atlas Air 1998-1C Escrow Receipts (the "Class C Escrow Receipts" and, together with the Class A Escrow Receipts and the Class B Escrow Receipts, the "Escrow Receipts"), such Escrow Receipts to be issued under the corresponding Escrow Agreements, (i) an executed copy of each of the three Deposit Agreements, (j) the forms of Assignment and Assumption Agreement attached to the Original Pass Through Trust Agreements (the "Form Assignment and Assumption Agreements"; the Pass Through Trust Agreements, the Note Purchase Agreement, the Pass Through Certificates, the Intercreditor Agreement, the Liquidity Facilities, the Escrow Agreements, 57 -3- the Escrow Receipts, the Deposit Agreements and the Assignment and Assumption Agreements (as defined below) are referred to herein collectively as the "Pass Through Trust Documents"), (k) the forms of "Leased Aircraft Indenture", "Leased Aircraft Participation Agreement", "Lease", "Owned Aircraft Indenture", and "Owned Aircraft Participation Agreement" attached to the Note Purchase Agreement (collectively, the "Form Aircraft Financing Documents"), (l) an executed copy of the Registration Rights Agreement, (m) the Final Memorandum dated January , 1998 (the "Final Memorandum") and (n) the documents delivered to you by Atlas at the closing pursuant to the Placement Agreement, including copies of Atlas' Certificate of Incorporation (the "Certificate of Incorporation") and By-Laws certified by the Secretary of the State of Delaware and the Assistant Secretary of Atlas, respectively. We have considered such matters of law and fact, and relied upon such certificates of officers of Atlas and public officials, corporate records and other information furnished to us, including without limitation the certificates and representations referred to below, as we have deemed appropriate as a basis for the opinions set forth below. In arriving at the opinion expressed below, we have assumed the authenticity of all documents submitted to us as originals and the conformity to the originals of all documents submitted to us copies. In addition, we have (i) reviewed the representations and warranties set forth therein, including without limitation the accuracy of the representations and warranties set forth in Section 5(a) of each of the Deposit Agreements and Section 5(i) of each of the Escrow Agreements, (ii) assumed that (A) each of the Pass Through Trust Documents has been (or, in the case of the Assignment and Assumption Agreements, will be) duly authorized, executed and delivered by each party thereto (other than Atlas and (B) each party to the Pass Through Trust Documents has the power and authority to enter into the Pass Through Trust Documents and has satisfied (or, in the case of the Assignment and Assumption Agreements, will satisfy) those legal requirements that are applicable to it to the extent necessary to make such agreement or obligation enforceable against it (except that the assumption set forth in this clause (ii)(B) is not made as to Atlas regarding matters of the law of the State of New York, applicable federal laws of the United States of America (other than federal aviation laws and other federal laws relating to the operation or maintenance of the Aircraft by Atlas) or the General Corporation Law of the State of Delaware), and 58 -4- that, except as specifically covered in the opinions expressed below, each of the Pass Through Trust Documents is a valid, binding and enforceable obligation of each party thereto, (iii) that the Pass Through Certificates and the Escrow Receipts conform (and when executed and delivered by the parties thereto will conform) as to the forms thereof that we have reviewed, (iv) that the Pass Through Certificates and the Escrow Receipts will be duly executed, authenticated and delivered, against payment therefor, all in accordance with the terms of the Pass Through Trust Documents and the Escrow Agreements, respectively, and of the Placement Agreement, and (v) that each Indenture, Lease, Participation Agreement and Equipment Note conforms or will conform, as the case may be, to the appropriate Form Aircraft Financing Document or, in the case of Equipment Notes, to the forms thereof set forth in the relevant Form Aircraft Financing Document. Based on and subject to the foregoing, and to the other assumptions, qualifications and limitations set forth herein, it is our opinion that: 1. Atlas is validly existing as a corporation in good standing under the laws of the State of Delaware. 2. Atlas has the corporate power (i) to own, lease and operate its properties and conduct its business as described in the Final Memorandum and (ii) to enter into each of the Pass Through Trust Documents and the Placement Agreement and to perform its obligations thereunder. 3. The execution and delivery by Atlas of each of the Atlas Pass Through Trust Documents have been duly authorized by all necessary corporate action of Atlas, and each of the Atlas Pass Through Trust Documents has been duly executed and delivered by Atlas. Each of the Atlas Pass Through Trust Documents (other than the Original Pass Through Trust Agreements, as to which we express no opinion) is a valid and binding obligation of Atlas enforceable against Atlas in accordance with its terms. 4. The execution and delivery by Atlas of the Placement Agreement and the Registration Rights Agreement has been duly authorized by all necessary corporate action of Atlas, and each of the Placement Agreement and the Registration Rights Agreement has been duly executed and delivered by Atlas. 5. Each of the Intercreditor Agreement, the Note Purchase Agreement and the Escrow Agreements is a valid and binding obligation of each Trustee that is a party thereto enforceable against each such Trustee in accordance with its terms. Each of the Successor Pass Through Trust Agreements is a valid and binding obligation of the applicable 59 -5- Successor Trustee enforceable against the applicable Successor Trustee in accordance with its terms. When executed and delivered in accordance with the terms of the Original Pass Through Trust Agreements and the Successor Pass Through Trust Agreements and in the form of the applicable Form Assignment and Assumption Agreement, properly completed, assuming that all facts and circumstances relevant to such matter are the same as is the case on the date hereof, each of the assignment and assumption agreements contemplated under the Original Pass Through Trust Agreements to be executed and delivered by the Trustees and the Successor Trustees (collectively, the "Assignment and Assumption Agreements") will be a valid and binding obligation of each of the parties thereto enforceable against each of such parties in accordance with its terms. When the Successor Pass Through Trust Agreements become effective according to their terms, the applicable conditions precedent set forth in the Original Pass Through Trust Agreements and Successor Pass Through Trust Agreements have been satisfied and the related Assignment and Assumption Agreement has been executed and delivered by each of the parties thereto, assuming that all facts and circumstances relevant to such matter are the same as is the case on the date hereof, each of the Pass Through Trust Certificates lawfully and validly Outstanding (as such term is defined in the Original Pass Through Trust Agreements) under the Original Pass Through Trust Agreements at such time will be entitled to the benefits of such Successor Pass Through Trust Agreements. Each of the Liquidity Facilities, the Intercreditor Agreement and the Note Purchase Agreement is a legal, valid and binding obligation of the Subordination Agent enforceable against the Subordination Agent in accordance with its terms. Each of the Escrow Agreements, the Deposit Agreements and the Note Purchase Agreement is a valid and binding obligation of each Escrow Agent that is a party thereto enforceable against each such Escrow Agent in accordance with its terms. The Escrow Receipts are validly issued and outstanding and are entitled to the benefits of the applicable Escrow Agreement. Each of the Escrow Agreement and the Note Purchase Agreement is a valid and binding obligation of the Paying Agent that is a party thereto enforceable against such Paying Agent in accordance with its terms. 6. The statements set forth under the headings "Description of the Certificates," "Description of the Deposit Agreements", "Description of the Escrow Agents", "Description of the Liquidity Facilities," "Description of the Intercreditor Agreement" and "Description of the Equipment Notes" in the Final Memorandum, insofar as such statements purport to summarize certain provisions of the Pass Through Certificates, the Pass Through Trust Agreements, the Deposit Agreements, the Escrow Agreements, the Escrow Receipts, the Liquidity Facilities, the Intercreditor Agreement and the Form Aircraft Financing Documents, provide a fair summary of such provisions. The statements set forth under "ERISA Considerations" in the Final Memorandum, insofar as such statements purport to summarize certain federal laws 60 -6- of the United States, provide a fair summary of such laws. The statements set forth under "Description of the Equipment Notes--Remedies" in the Final Memorandum, insofar as such statements purport to summarize provisions of Section 1110 of the U.S. Bankruptcy Code, provide a fair summary of such provisions. 7. While there is no authority addressing the characterization of entities that are similar to the Trusts in all material respects, each of the Original Trusts should be classified as a grantor trust for U.S. federal income tax purposes. If, as may be the case, the Original Trusts are not classified as grantor trusts, they will be classified as partnerships for U.S. federal income tax purposes and will not be classified as publicly traded partnerships taxable as corporations provided that at least 90% of each such Original Trust's gross income for each taxable year of its existence is "qualifying income" within the meaning of Section 7704(d) of the Internal Revenue Code of 1986, as amended. Each of the Successor Trusts will be classified as a grantor trust for U.S. federal income tax purposes. The statements set forth under the heading "Certain U.S. Federal Income Tax Consequences" in the Final Memorandum, insofar as such statements purport to address the federal income tax laws of the United States, are accurate in all material respects with respect to the matters discussed therein and constitute a fair summary of the material U.S. federal income tax consequences of an investment in the Pass Through Certificates (with attached Escrow Receipts). 8. Atlas is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended (the "Investment Company Act"). The Original Trusts created under the Original Pass Through Trust Agreements are not required to be registered under the Investment Company Act. As of the Successor Pass Through Trust Effective Date, assuming that all facts and circumstances relevant to such matter are the same as is the case on the date hereof, the Successor Trusts created under the Successor Pass Through Trust Agreements will not be required to be registered under the Investment Company Act. 9. The issuance and sale of the Pass Through Certificates to the Placement Agent pursuant to the Placement Agreement, the issuance of the Escrow Receipts attached to Pass Through Certificates, the valid authorization, execution and delivery of the Atlas Pass Through Trust Documents by Atlas and the performance by Atlas of its respective obligations under the Atlas Pass Through Trust Documents do not require Atlas to obtain or effect any consent, approval, authorization, registration or qualification of or with any governmental agency or body of the United States or of the State of New York, except such as are required under the Securities Act of 1933, as amended (the "Securities Act"), and the securities or blue sky laws of the various states. Neither the execution and delivery by Atlas of the Atlas Pass Through Trust Documents and the Placement Agreement nor the consummation 61 -7- by Atlas of the transactions contemplated thereby to be consummated on the date hereof violates (i) Atlas' Certificate of Incorporation or By-Laws or (ii) any law or governmental rule or regulation known to us to be applicable to, or binding on, Atlas. Assuming that all facts and circumstances relevant to such matter are the same on the Successor Pass Through Trust Effective Date as is the case on the date hereof, neither the execution and delivery of the Assignment and Assumption Agreements on such Successor Pass Through Trust Effective Date in accordance with the terms of the Original Pass Through Trust Agreements and the Successor Pass Through Trust Agreements and in the form of the applicable Form Assignment and Assumption Agreement, nor the consummation by the parties thereto of the transactions contemplated to be consummated thereunder on such Successor Pass Through Effective Date, will violate any law or governmental rule or regulation known to us to be applicable to the transactions contemplated by the Assignment and Assumption Agreements. 10. Each of the Escrow Agreements creates a valid escrow under New York law and a valid equitable interest in the escrowed property in favor of the corresponding Trustee. Neither a New York court nor a United States federal court applying New York law or the U.S. Bankruptcy Code, if properly presented with the issue and after having properly considered such issue, would permit any holder of an Escrow Receipt to terminate the related Escrow Agreement, except in accordance with its terms. 11. So long as an Escrow Agreement has not been terminated, creditors of any person that is a holder of an Escrow Receipt thereunder or holders of a lien against the assets of any such person, such as trustees, receivers or liquidators (whether or not any insolvency proceeding has been commenced) (collectively, the "Creditors"), may acquire valid claims and liens, as to the Deposits established thereunder and as to the related Deposit Agreement and Escrow Agreement, only against the rights of the holder of such Escrow Receipt under such Escrow Agreement, and do not have, and may not through the enforcement of such Creditors' rights acquire, any greater right than the holder of such Escrow Receipt with respect to such Deposits, Deposit Agreement or Escrow Agreement. 12. No creditor of Atlas or any of its subsidiaries, and no holder of a lien against the assets of any such person, such as trustees, receivers or liquidators (whether or not any insolvency proceeding has been commenced), may acquire valid claims or liens as to the Deposits and the related Deposit Agreements and Escrow Agreements. Payment by the Depositary of interest, Purchase Withdrawal and Final Withdrawal amounts pursuant to Section 2.02 and 2.03, as the case may be, of the Deposit Agreements, made in accordance with the terms of the Deposit Agreements, will not constitute preferential payments under Section 547 of the Bankruptcy Code recoverable under Section 550 of the Bankruptcy Code should Atlas or any of its subsidiaries become a debtor in proceedings under the Bankruptcy Code. 62 -8- 13. No registration under the Securities Act of the Pass Through Certificates is required in connection with the sale of the Pass Through Certificates to the Placement Agents as contemplated by the Placement Agreement and the Final Memorandum or in connection with the initial resale of the Pass Through Certificates by the Placement Agents in accordance with Section 2 of the Placement Agreement, and prior to the commencement of the Exchange Offer (as defined in the Registration Rights Agreement) or the effectiveness of the Shelf Registration Statement (as defined in the Registration Rights Agreement), the Pass Through Trust Agreements are not required to be qualified under the TIA, in each case assuming (i)(A) that the purchasers who buy such Pass Through Certificates in the initial resale thereof are qualified institutional buyers as defined in Rule 144A promulgated under the Act ("QIBs"), or other investors that are institutional "accredited investors" as that term is defined in Rule 501(A)(1), (2), (3) or (7) under the Act or (B) that the offer or sale of the Pass Through Certificates is made in an offshore transaction as defined in Regulation S under the Act, (ii) the accuracy of the Placement Agents' representations in Section 6 of the Placement Agreement and those of Atlas contained in the Placement Agreement regarding the absence of a general solicitation in connection with the sale of such Pass Through Certificates to the Placement Agent and the initial resale thereof and (iii) the due performance by the Placement Agents of the agreements set forth in Section 6 of the Placement Agreement. The foregoing opinions are subject to the following assumptions, qualifications and limitations: (a) The opinions in paragraphs 3 and 5 above are subject to (i) bankruptcy, insolvency, fraudulent transfer, fraudulent conveyance or other similar laws affecting the rights or remedies of creditors generally, (ii) general principles of equity including, without limitation, laches and estoppel as equitable defenses and concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether enforceability is considered or applied in a proceeding in equity or at law) and considerations of impracticability or impossibility of performance, and defenses based upon unconscionability of otherwise enforceable obligations in the context of the factual circumstances under with enforcement thereof is sought, (iii) the qualification that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought and (iv) in the case of the Successor Pass Through Trust Agreements, the delayed effectiveness thereof in accordance with their respective terms. The opinions in paragraphs 10, 11 and 12 above are subject to (i) fraudulent transfer or fraudulent conveyance laws, (ii) 63 -9- general principles of equity including, without limitation, laches and estoppel as equitable defenses and concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether enforceability is considered or applied in a proceeding in equity or at law) and considerations of impracticability or impossibility of performance, and defenses based upon unconscionability of otherwise enforceable obligations in the context of the factual circumstances under which enforcement thereof is sought and (iii) the qualifications that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. (b) We express no opinion as to Section 7.11(a)(ii) of the Liquidity Facilities or Section 10.11(a)(ii) of the Intercreditor Agreement whereby the parties to such agreements waive any objections to the laying of venue in the courts of the State of New York and the courts of the United States of America for the Southern District of New York (and we note that such matters may be raised by such courts). We express no opinion as the enforceability of any provision contained in any of the Pass Through Trust Documents (i) that purports to establish or may be construed to establish evidentiary standards, (ii) as such provision relates to the jurisdiction of federal courts or (iii) providing for late payment charges but only to the extent such provision is deemed to constitute a penalty or liquidated damages provision. Under certain circumstances the requirement that the provisions of a Pass Through Trust Document may be modified or waived only in writing or only in a specific instance and provisions to the effect that failure or delay in exercising any right, remedy, power and/or privilege will not impair or waive such right, remedy, power and/or privilege may be unenforceable to the extent that an oral agreement has been effected on a course of dealing has occurred modifying such provisions. A court may modify or limit contractual agreements regarding attorneys' fees. (c) Provisions of any Pass Through Trust Document which permit any person to take action or make determinations, or to benefit from indemnities, contribution agreements or similar undertakings, or waivers, exculpatory provisions or similar provisions, may be subject to limitations imposed by law or by public policy considerations. (d) Insofar as the foregoing opinions relate to the valid existence and good standing of Atlas, they are based solely on a certificate of good standing received from the Secretary of State of the State of Delaware. (e) In stating the opinions set forth in paragraphs 10 and 11, we have assumed that each holder of an Escrow Receipt is and will 64 -10- at all relevant times be an entity of a type eligible for relief under the Federal Bankruptcy Code as provided in Section 109 thereof. (f) The foregoing opinions are limited to the law of the State of New York, the federal law of the United States of America and the General Corporation Law of the State of Delaware, in each case as in effect on the date hereof, except that we express no opinion with respect to (i) the laws, regulations or ordinances of any county, town or municipality or governmental subdivision or agency thereof, (ii)(x) state securities or blue sky laws (y) except as set forth in paragraph 8 above, the Investment Company Act, or (z) except as set forth in paragraph 9 above, federal securities laws other than the Investment Company Act, including without limitation the Securities Act and the Trust Indenture Act, (iii) any federal (except as set forth in paragraph 7 above) or state tax, antitrust or fraudulent transfer or conveyance laws, (iv) except as set forth in the penultimate sentence of paragraph 6 above, the Employee Retirement Income Security Act of 1974, as amended, or (v) federal aviation laws and other federal laws relating to the operation and maintenance of the Aircraft by Atlas. In addition, our opinions are based upon a review of those laws, statutes, rules and regulations which, in our experience, are normally applicable to transactions. We have participated in conferences with officers and other representatives of Atlas, representatives of the independent public accountants for Atlas, representatives of the Placement Agents and counsel for the Placement Agents, at which the contents of the Final Memorandum and related matters were discussed. Although we are not passing upon and do not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Final Memorandum, on the basis of the foregoing (relying as to materiality to a large extent on discussions with and representations and opinions of officers and other representatives of Atlas) no facts have come to our attention which lead us to believe that the Final Memorandum (except for the financial statements and other financial or statistical data included therein or omitted therefrom, as to which we need express no opinion), on the date thereof or at the Closing Date, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements contained therein, in the light of the circumstances under which they were made, not misleading. We are furnishing this opinion letter to you solely for your benefit. This opinion letter is not to be used, circulated or otherwise referred to for any other purpose whatsoever without in each instance our prior written consent. This opinion letter speaks only as of the date hereof and we disclaim any obligation to advise you of changes of law or fact that occur after the date hereof. Very truly yours, 65 EXHIBIT C Form of Opinion of David Brictson, In-House Legal Counsel to the Company 66 [ATLAS LETTERHEAD] February 9, 1998 To Each of the Persons Listed on Schedule A Attached Hereto Ladies and Gentlemen: I am the Legal Counsel of Atlas Air, Inc., a Delaware corporation ("Atlas"). In such capacity, I and persons on my legal staff have acted as counsel to Atlas in connection with the transactions contemplated by the Placement Agreement dated January 27, 1998 among Morgan Stanley & Co. Incorporated, BT Alex. Brown Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation, and Goldman Sachs & Co. (collectively, the "Placement Agents") and Atlas (the "Placement Agreement"). Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Placement Agreement or, if not defined therein, the Intercreditor Agreement (as defined below). This opinion is furnished pursuant to Section 3(e) of the Placement Agreement. In arriving at the opinions expressed below, I or members of my legal staff have reviewed the following documents, each of which is dated as of the date hereof, except where otherwise indicated above or below: (a) an executed copy of the Placement Agreement, (b) an executed copy of the Note Purchase Agreement, (c) executed copies of the three Original Pass Through Trust Agreements, dated as of February 9, 1998 between Atlas and Wilmington Trust Company, as trustee, relating to the Original Trusts (each Original Pass Through Trust Agreement is referred to individually as an "Original Pass Through Trust Agreement" and collectively as the "Original Pass Through Trust Agreements"), 67 -2- (d) a form of each of the three Pass Through Trust Agreements (the "Successor Pass Through Trust Agreements") between Atlas and Wilmington Trust Company, as trustee, relating to the Successor Trusts (each Successor Pass Through Trust Agreement is referred to individually as a "Successor Pass Through Trust Agreement" and collectively as the "Successor Pass Through Trust Agreements", and the Successor Pass Through Trust Agreements, together with the Original Pass Through Trust Agreements, are referred to as the "Pass Through Trust Agreements"), (e) a form of each of the Atlas Air Series 1998-1A Pass Through Certificates (the "Class A Certificates"), the Atlas Air Series 1998-1B Pass Through Certificates (the "Class B Certificates") and the Atlas Air Series 1998-1C Pass Through Certificates (the "Class C Certificates" and, together with the Class A Certificates and the Class B Certificates, the "Pass Through Certificates"), such Pass Through Certificates to be issued under the corresponding Original Pass Through Trust Agreements, (f) an executed copy of the Intercreditor Agreement among the Trustees, ABN AMRO Bank N.V., acting through its Chicago branch, as Class A Liquidity Provider, and Morgan Stanley Capital Services, Inc., as Class B and Class C Liquidity Provider (as defined therein), and Wilmington Trust Company, as Subordination Agent and trustee (the "Intercreditor Agreement"), (g) an executed copy of each of the three Revolving Credit Agreements between the Subordination Agent, as borrower, and ABN AMRO Bank, N.V., as liquidity provider with respect to the Class A Certificates, and Morgan Stanley Capital Services, Inc., as liquidity provider with respect to the Class B Certificates and the Class C Certificates, respectively (the "Liquidity Facilities"), (h) an executed copy of each of the three Escrow Agreements, 68 -3- (i) a form of each of the Atlas Air 1998-1A Escrow Receipts (the "Class A Escrow Receipts"), the Atlas Air 1998-1B Escrow Receipts (the "Class B Escrow Receipts") and the Atlas Air 1998-1C Escrow Receipts (the "Class C Escrow Receipts" and, together with the Class A Escrow Receipts and the Class B Escrow Receipts, the "Escrow Receipts"), such Escrow Receipts to be issued under the corresponding Escrow Agreements, (j) an executed copy of each of the three Deposit Agreements, (k) the forms of Assignment and Assumption Agreement attached to the Original Pass Through Trust Agreements (when executed and delivered as contemplated under the Pass Through Trust Agreements, the "Assignment and Assumption Agreements" and together with the Pass Through Trust Agreements, the Note Purchase Agreement, the Pass Through Certificates, the Intercreditor Agreement, the Liquidity Facilities, the Escrow Agreements, the Escrow Receipts and the Deposit Agreements, the "Pass Through Trust Documents"), (l) the forms of "Leased Aircraft Indenture", "Leased Aircraft Participation Agreement", "Lease", "Owned Aircraft Indenture", and "Owned Aircraft Participation Agreement" attached to the Note Purchase Agreement, (m) the Offering Memorandum dated January 27, 1998 (the "Offering Memorandum"), and (n) the documents delivered to you by Atlas at the closing pursuant to the Placement Agreement, including copies of Atlas' Certificate of Incorporation (the "Certificate of Incorporation") and By-Laws certified by the Secretary of State of the State of Delaware and the Assistant Secretary of Atlas, respectively. In addition, I or members of my legal staff have reviewed the originals or copies certified or otherwise identified to my or their satisfaction of all such corporate records of Atlas and its Subsidiaries (as defined below) and such other instruments and other certificates of public officials, officers and representatives of Atlas and such other persons, and I or members of 69 -4- my legal staff have made such investigations of law, as I deemed appropriate as a basis for the opinions expressed below. In arriving at the opinions expressed below, I and members of my legal staff have assumed the authenticity of all documents submitted to us as originals and the conformity to the originals of all documents submitted to us as copies. In addition, I and members of my legal staff have assumed and have not verified the accuracy as to factual matters of each document I or they have reviewed including, without limitation, the accuracy of the representations and warranties of Atlas in the Placement Agreement. As used herein, the phrase "to my knowledge" shall mean to my actual knowledge after reasonable investigation, but shall not be interpreted to impute to me knowledge of others. Based on the foregoing, and subject to the further assumptions, qualifications and limitations set forth below, it is my opinion that: 1. Each of Atlas One, Inc., Atlas Freighter Leasing, Inc., Atlas Freighter Leasing II, Inc., Atlas Air Services Limited, LHC Properties, Inc., Genessee Insurance Company, Ltd. and Atlas Freightlease, Inc. (together, the "Subsidiaries") and Atlas has been duly incorporated and is an existing corporation in good standing under the laws of the jurisdiction of its incorporation, with corporate power to own, lease and operate its properties and conduct its business as described in the Offering Memorandum. Each of Atlas and its Subsidiaries is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in the United States in which its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified would not have an Atlas Material Adverse Effect. 2. To my knowledge, except as disclosed in the Offering Memorandum, there is no action, suit or proceeding before or by any governmental agency or body or court, domestic or foreign, now pending against Atlas or any of the Subsidiaries or any of their respective properties that will have an Atlas Material Adverse Effect or will have a material adverse effect on the ability of Atlas to perform its obligations under any of the Pass Through Trust Agreements or the Note Purchase Agreement (the Pass Through Trust Agreements and the Note Purchase Agreement are referred to collectively as the "Atlas Pass Through Trust Documents"). 70 -5- 3. Atlas is a "citizen of the United States" within the meaning of Section 40102(a)(15) of Title 49 of the United States Code, as amended, holding an air carrier operating certificate issued by the Secretary of Transportation pursuant to Chapter 447 of Title 49 of the United States Code, as amended, for aircraft capable of carrying 10 or more individuals or 6,000 pounds or more of cargo. 4. The execution, delivery and performance by Atlas of the Atlas Pass Through Trust Documents, and the consummation by Atlas of the transactions contemplated by such documents, will not result in any violation of the provisions of the Certificate of Incorporation or By-Laws of Atlas or, to my acknowledge, any applicable law, administrative regulation or any administrative or court decree, nor does any such action, to my knowledge, constitute a breach of, or default under, or (except as contemplated therein) result in the creation or imposition of any lien, charge or encumbrance upon any assets of Atlas or any of the Subsidiaries pursuant to, any material contract, indenture, mortgage, loan agreement, note, lease or other instrument to which Atlas or any of the Subsidiaries is a party or by which any of them are bound or to which any of the assets of Atlas or any of the Subsidiaries is subject. 5. The issuance and sale of the Pass Through Certificates to the Placement Agents pursuant to the Placement Agreement, the issuance of the Escrow Receipts attached to the Pass Through Certificates, the valid authorization, execution and delivery of the Atlas Pass Through Trust Documents by Atlas and the performance by Atlas of its obligations under the Atlas Pass Through Trust Documents do not require Atlas to obtain or effect any consent, approval, authorization, registration or qualification of or with any governmental agency or body of the United States or the State of Colorado, except such as may be required under federal or state securities or blue sky laws. 6. To my knowledge, except as disclosed in the Offering Memorandum, there is no event of default under any material agreement or instrument under which indebtedness of Atlas is outstanding or by which it is bound or any of its properties is subject. 7. To my knowledge, there are no legal or governmental proceedings pending or threatened against Atlas or any Subsidiary other than those disclosed in the Offering Memorandum or those which individually (or in the aggregate in the case of any class of related lawsuits) could not reasonably be expected to have a Atlas Material Adverse Effect. 71 -6- Insofar as the foregoing opinions relate to the valid existence and good standing of Atlas and the Subsidiaries, they are based solely on certificates of good standing received from the appropriate officials of the respective jurisdictions of incorporation. Insofar as the foregoing opinions relate to qualification to do business of Atlas and the Subsidiaries, they are based solely on certificates of foreign qualification received from the applicable Secretary of State's office. The foregoing opinions are limited to the federal law of the United States of America, the General Corporation Law of the State of Delaware and the law of the State of Colorado, in each case as in effect on the date hereof, except that I express no opinion with respect to (i) the laws, regulations or ordinances of any county, town or municipality or governmental subdivision or agency thereof, (ii) (x) state securities or blue sky laws and (y) federal securities laws, including without limitation the Securities Act, the Securities Exchange Act of 1934, as amended, the Trust Indenture Act of 1939, as amended, and the Investment Company Act of 1940, as amended, (iii) any federal or state tax, antitrust or fraudulent transfer or conveyance laws (iv) the Employee Retirement Income Security Act of 1974, as amended, or (v) federal aviation laws, or any other federal laws relating to the operation and maintenance by Atlas of the Aircraft. In addition, my opinions are based upon a review of those laws, statutes, rules and regulations which, in my experience, are normally applicable to transactions of the type contemplated by the Pass Through Trust Documents. I am furnishing this opinion letter to you solely for your benefit in connection with the transactions described above. This opinion letter is not to be used, circulated, quoted or otherwise referred to by any other person or for any other purpose. This opinion letter speaks only as of the date hereof and I disclaim any obligation to advise you of changes of law or fact that occur after the date hereof. Very truly yours, 72 EXHIBIT D Form of Opinion of Morris, James, Hitchins & Williams, Counsel to the Trustee 73 [DRAFT OPINION OF MORRIS, JAMES, HITCHENS, & WILLIAMS] February 9, 1998 To Each of the Parties Listed on Schedule A Attached Hereto Re: Atlas Air Pass Through Certificates, Series 1998 1 Ladies and Gentlemen: We have acted as counsel to Wilmington Trust Company, a Delaware banking corporation (in its individual capacity, "Wilmington Trust", in its capacity as Mortgagee, Subordination Agent, and Pass Through Trustee, as the case be, the "Trustee"), in connection with the transactions contemplated by the Pass Through Trust Agreements between Atlas Air, Inc. ("Atlas") and Wilmington Trust, as Trustee, (the "Pass Through Trust Agreements"), relating to Atlas Air Pass Through Trust, 1998-1A-O, Atlas Air Pass Through Trust 1998-1B-O, and Atlas Air Pass Through Trust 1998-1C-O (collectively, the "Trusts"), each dated as of February 9, 1998. This opinion is furnished at your request in connection with the Pass Through Certificates being issued today. Capitalized terms used herein and not otherwise defined are used as defined in the Pass Through Trust Agreements, except that reference herein to any documents shall mean such documents as in effect as of the date hereof. We have examined executed counterparts of the following documents: (a) the Pass Through Trust Agreements; (b) the Intercreditor Agreement; 74 To Each of the Parties Listed on Schedule A Attached Hereto February 9, 1998 Page 2 (c) each of the Liquidity Facilities; (d) the Registration Rights Agreement (e) the Indenture (the documents described in items (a) through (e) are collectively referred to herein as the "Transaction Documents"); and (f) the Certificates being issued today in definitive form by the Trusts "Certificates". We also have examined and relied on originals or copies of such other documents and such corporate records, certificates and other statements of governmental officials and corporate officers and other representatives of the corporations or entities referred to herein as we have deemed necessary or appropriate for the purposes of this opinion. Moreover, as to certain facts material to the opinions expressed herein, we also have relied upon the representations and warranties contained in the certificates and other documents referred to in this paragraph. Based upon the foregoing and upon an examination of such questions of law as we have considered necessary or appropriate, and subject to the assumptions, exceptions and qualifications set forth below, we advise you that, in our opinion: 1. Wilmington Trust is a banking corporation duly organized and validly existing in good standing under the laws of the State of Delaware, and has the corporate power and authority to execute, deliver and perform, in its individual capacity, or as Trustee, as the case may be, the Transaction Documents, and the Certificates. Wilmington Trust is a "citizen of the United States" as defined in 49 U.S.C. Section 40102. 2. Each of the Transaction Documents has been duly authorized, executed and delivered by Wilmington Trust in its individual capacity, or as Trustee, as the case may be, and constitutes the legal, valid and binding obligation of Wilmington Trust in its individual capacity, or as Trustee, as the case may be, enforceable against Wilmington Trust in its individual capacity, or as Trustee, as the case may be, in accordance with its terms. 3. The Pass Through Trust Agreements constitute the legal, valid and binding obligations of Atlas, enforceable against Atlas in accordance with their terms. 4. Wilmington Trust, solely in its capacity as Trustee, has duly authorized, issued, executed and delivered the Certificates to the holder thereof pursuant to the 75 To each of the Parties Listed on Schedule A Attached Hereto February 9, 1998 Page 3 terms and provisions of the Pass Through Trust Agreements; the Certificate are duly authorized, legal, valid and binding obligations of the Trusts, enforceable against the Trusts in accordance with their terms and the terms of the Pass Through Agreements and are entitled to the benefits of the Pass Through Trust Agreements; when issued in exchange for the certificates pursuant to the Registration rights Agreement and authenticated pursuant to the Pass Through Trust Agreements, the Exchange Certificates will be duly authorized, legal, valid and binding obligations of the Trusts, enforceable against the Trusts in accordance with their terms and the terms of the Pass Through Trust Agreements and will be entitled to the benefits of the Pass Through Trust Agreements. 5. No authorization, consent or approval of, notice to or filing with, or the taking of any other action in respect of, any governmental authority or agency of the United States or the State of Delaware governing the banking or trust powers of Wilmington Trust is required for the execution, delivery or performance by Wilmington Trust in its individual capacity, or as Trustee, as the case may be, of the Transaction documents or the Certificates. 6. Neither the execution, delivery or performance by Wilmington Trust in its individual capacity, or as Trustee, as the case may be, of the Transaction Documents or the Certificates, nor compliance with the terms and provisions thereof, conflicts with the charter or bylaws of Wilmington Trust or results in a breach or violation of any of the terms, conditions or provisions of any law, governmental rule or regulation of the United States or the State of Delaware governing the banking or trust powers of Wilmington Trust or, to our knowledge, any order, writ, injunction or decree of any court or governmental authority against Wilmington Trust or by which it or any of its properties is bound or, to our knowledge, any indenture, mortgage, contract or other agreement or instrument to which Wilmington Trust is a party or by which it or any of its properties is bound, or constitutes a default thereunder. 7. Assuming that the Trusts will not be taxable as corporations, but, rather, will be classified as grantor trusts under subpart E, Part I of Subchapter J of the United States Internal Revenue Code of 1986 (the "Code"), as amended, or as partnerships under Subchapter K of the Code, and assuming (a) that the assets of the Trusts will be treated as held for investment purposes as provided in each Pass Through Trust Agreement and (b) that the acquisition, management and disposition of the assets of the Trusts (if the assets were held by a Certificateholder directly) would not constitute an integral part of the regular trade or business of such Certificateholder (other than the trade or business of investing), (i) the 76 To Each of the Parties Listed on Schedule A Attached Hereto February 9, 1998 Page 4 Trusts will not be subject to any tax (including, without limitation, net or gross income, tangible or intangible property, net worth, capital, franchise or doing business tax), fee or other governmental charge under the laws of the State of Delaware or any political subdivision thereof and (ii) Certificateholders that are not residents of or otherwise subject to tax in Delaware will not be subject to any tax (including, without limitation, net or gross income, tangible or intangible property, net worth, capital, franchise or doing business tax), fee or other governmental charge under the laws of the State of Delaware or any political subdivision thereof as a result of purchasing, holding (including receiving payments with respect to) or selling a Certificate. 8. To our knowledge, there are no proceedings pending or threatened against or affecting Wilmington Trust in any court or before any governmental authority, agency, arbitration board or tribunal which, if adversely determined, individually or in the aggregate, would materially and adversely affect the Trusts or question the right, power and authority of Wilmington Trust in its individual capacity, or as Trustee, as the case may be, to enter into or perform its obligations under the Transaction Documents or which would call into question or challenge the validity of any of the Transaction Documents or the enforceability thereof. 9. Each of the Equipment Notes (as defined in the Trust Indenture) to be delivered to and registered in the name of the Subordination Agent pursuant to the Intercreditor Agreement will be held by the Subordination Agent in trust as trustee for the Trusts under the Pass Through Trust Agreements on behalf of the Certificateholder of the Trusts. The foregoing opinions are subject to the following assumptions, exceptions and qualifications: 1. We are admitted to practice law in the State of Delaware and do not hold ourselves out as being experts on the law of any other jurisdiction. The foregoing opinions are limited to the laws of the State of Delaware and the federal laws of the United States of America governing the banking and trust powers of Wilmington Trust (except that we express no opinion with respect to (i) federal securities laws, including, without limitation, the Securities Act of 1933, as amended, the Trust Indenture Act of 1939, as amended, and the Investment Company Act of 1940, as amended, or (ii) state securities or blue sky laws). Insofar as the foregoing opinions relate to the validity and enforceability of the Transaction Documents expressed to be governed by the laws of the State of New York, we have assumed that each such document is legal, valid, binding and enforceable in accordance with its terms under such laws (as to which we express no opinion). 77 To Each of the Parties Listed on Schedule A Attached Hereto February 9, 1998 Page 5 B. The foregoing opinions regarding enforceability are subject to (i) applicable bankruptcy, insolvency, moratorium, receivership, reorganization, fraudulent conveyance and similar laws relating to or affecting the rights and remedies of creditors generally, and (ii) principles of equity (regardless of whether considered and applied in a proceeding in equity or at law). C. We have assumed the due authorization, execution and delivery by each of the parties thereto (other than Wilmington Trust in its individual capacity, or as Trustee, as the case may be) of the Transaction Documents, that each of such parties has the full power, authority and legal right to execute, deliver and perform each such document. D. We have assumed that all signatures (other than those of Wilmington Trust in its individual capacity, or as Trustee, as the case may be) on documents examined by us are genuine, that all documents submitted to us as originals are authentic, and that all documents submitted to us as copies or specimens conform with the originals, which facts were have not independently verified. E. We have not participated in the preparation of any offering materials with respect to the Certificates and assume no responsibility for their contents. This opinion may be relied upon by you in connection with the matters set forth herein. Without our prior written consent, this opinion may be not be furnished or quoted to, or relied upon by, any other person or entity for any purpose. Very truly yours, 78 EXHIBIT E Form of Opinion of Ray, Quinney & Nebeker, Counsel to the Escrow Agent 79 EXHIBIT F-1 Forms of Opinion of Vedder, Price, Kaufman & Kammholz, U.S. Counsel to the Class A Liquidity Provider 80 February __, 1998 To the Addressees Listed on Exhibit A Attached Hereto RE: ATLAS AIR, INC. PASS THROUGH CERTIFICATES, SERIES 1998-1 Ladies and Gentlemen: We have acted as special counsel to ABN AMRO Bank N.V., Chicago Branch ("ABN AMRO") in connection with the transactions contemplated by that certain Revolving Credit Agreement (1998-1A)(the "Credit Agreement"), dated as of ________ ____, 1998, by and between Wilmington Trust Company ("WTC"), not in its individual capacity except as expressly provided therein, but solely as Subordination Agent under the Intercreditor Agreement (as defined below), as agent and trustee for the Atlas Airlines Pass Through trust 199_ -1A (the "Trust"), as Borrower and ABN AMRO, as Liquidity Provider; and the Intercreditor Agreement dated as of __________ ____, 1998 (the "Intercreditor Agreement") by and among WTC, as Trustee under the Trust, ABN AMRO, as Class A Liquidity Provider, Morgan Stanley & Co. Incorporated, as Class B Liquidity Provider and Class C Liquidity Provider and WTC, as Subordination Agent and Trustee (the Credit Agreement and the Intercreditor Agreement are hereinafter collectively referred to as the "Liquidity Documents"). Except as otherwise noted herein, all capitalized terms used herein shall have the respective defined meanings set forth in the Credit Agreement. In connection with our opinion herein, we have (i) examined executed counterparts of the Liquidity Documents, (ii) relied without independent investigation or verification, upon the representations and warranties as to factual matters contained in each of the Operative Agreements and upon originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, documents and other instruments as we have deemed relevant to the rendering of this opinion, and (iii) in such examination assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. 81 VEDDER PRICE Based upon and subject to the foregoing, it is our opinion that: 1. Each of the Liquidity Documents constitutes the legal, valid and binding obligation of each of the parties thereto enforceable against such parties in accordance with its terms, except as such enforceability is limited by (i) bankruptcy, receivership, conservatorship, insolvency, fraudulent transfer, liquidation, reorganization, moratorium or other laws affecting creditors' rights and remedies generally from time to time in effect as the same may be applied in the event of the bankruptcy, receivership, conservatorship, insolvency, moratorium, liquidation, reorganization or similar situation of any such party, or other similar occurrence with respect to any such party or by laws affecting the rights of creditors of depository institutions, (ii) the possible judicial application of foreign laws or governmental action affecting creditors' rights generally, (iii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law), public policy and applicable law relating to fiduciary duties, and (iv) any implied covenant of good faith and fair dealing. 2. ABN AMRO Bank N.V. is licensed by the Office of Banks and Real Estate of the State of Illinois to maintain its branch at 135 LaSalle Street, Chicago, Illinois (the "Branch"), in accordance with the banking law of the State of Illinois and the Branch has the full power, authority and legal right to execute and deliver the Liquidity Documents. 3. The execution, delivery and performance by ABN AMRO of the Liquidity Documents, and the consummation of the transactions contemplated therein do not violate any banking law, or any governmental rule or regulation relating thereto, of the United States of America, the State of Illinois or the State of New York. 4. No authorization, consent, approval or other action by, and no notice to or filing with, any banking authority or regulatory body of the United States of America, the State of Illinois or the State of New York is required for the due execution, delivery and performance by ABN AMRO of the Liquidity Documents other than administrative and ministerial filings which ABN AMRO is obligated to make in the ordinary course of its business (which filings we have assumed have been and will continue to be made in a timely manner). 5. The payment obligations of ABN AMRO under the Liquidity Documents constitute unsecured and unsubordinated obligations of ABN AMRO. No opinion is given herein as to (i) the availability of specific performance or equitable relief of any kind or (ii) any federal or state securities laws. In rendering the opinions set forth above, we have assumed that each of the parties to the Liquidity Documents has the full power, authority and legal right to enter into the Liquidity Documents and that the Liquidity Documents have been duly authorized, executed and delivered by each of such parties. 82 VEDDER PRICE We note that the operations of ABN AMRO are subject to the laws and regulations of the State of Illinois, including the laws and regulations governing bank deposits and collections and in the event of a conflict between Illinois law and New York law regarding bank deposits and collections, Illinois law would prevail. We further express no opinion as to the validity, binding effect or enforceability of (i) purported waivers of any statutory or other rights, court rules or defenses to obligations or consents to any actions where such waivers or consents (A) are against public policy or (B) constitute waivers of rights or consents to actions which by law, regulation or judicial decision may not otherwise be waived or given, (ii) provisions indemnifying any person against, or relieving any person of liability for, its own negligent or wrongful acts or in any other circumstances where enforcement of such provisions would be against public policy or limited or prohibited by applicable law, (iii) any provisions which purport to authorize or permit any person to act in a manner which is determined not to be in good faith or commercially reasonable or any provisions which purport to waive any rights in respect of such acts, (iv) any provisions which purport to authorize or permit any person to exercise any right or remedy upon any nonmaterial breach or default, (v) any forum selection provision, (vi) any powers of attorney to the extent that they purport to grant rights and powers that may not be granted under applicable law, (vii) any right or obligation to the extent that the same may be varied by course of dealing or performance, or (viii) any provision that is subject to any mutual mistake of fact or misunderstanding, fraud, duress or undue influence. This opinion is rendered to you for your benefit and may not be relied upon by any other person, or by you for any other purpose, without our express written consent. We do not express herein any opinion as to any matters governed by any law other than the laws of the State of New York, the State of Illinois and the Federal law of the United States. This opinion is given as of the date hereof and we assume no obligation to advise you of any change which may hereafter be brought to our attention. Very truly yours, DNG:DAW 83 EXHIBIT F-2 Form of Opinion of Clifford Chance, Netherlands Counsel to the Class A Liquidity Provider 84 Draft no (1) MMVK/TAK [*] January 1998 To: The Persons Listed on the Schedule hereto Dear Sirs, Atlas Air Pass Through Certificates Series 1998-1 We have acted as Dutch legal counsel to ABN AMRO Bank N.V. ("ABN AMRO"), acting through its Chicago Branch, in connection with the revolving credit agreement 1998-1 dated as of [* January 1998 (the "Revolving Credit Agreement") by and between [SUBORDINATION AGENT]("[*]") as Subordination Agent, as agent and as trustee for Atlas Air Pass Through Trust 1998-1A, 1998-1B and 1998-1C (the "Trusts") as Borrower, and ABN AMRO, Chicago Branch as Class A Liquidity Provider, and the Intercreditor Agreement dated as of [*] January 1998 the "Intercreditor Agreement") by and among [*], as Trustee under the Trust, ABN AMRO, Chicago Branch as Class A Liquidity Provider and [*] as Subordination Agent and Trustee (the Revolving Credit Agreement and the Intercreditor Agreement are hereinafter collectively referred to as the "Liquidity Documents"). This opinion is being furnished at your specific request. In such capacity, we have examined the following documents, as well as such other documents and instruments as we have deemed necessary or advisable for the purposes of this opinion: (a) [a draft of the Revolving Credit Agreement (1998-1) dated [*]] and a draft of the Intercreditor Agreement sent to us by fax of 12 January 1998; 85 -2- (b) a copy of the articles of association (statuten) of ABN AMRO as they stand on the date hereof since their latest amendment dated 21 September 1991, being the currently effective articles of association according to the extract referred to in (c) below (the "Articles of Association"); and (c) a copy of an official summary extract (beperkt uittreksel) dated 19 December 1997 from the Commercial Register of the Chamber of Commerce of Amsterdam relating to the registration of ABN AMRO under number 332587 and confirmed to us by the Chamber of Commerce of Amsterdam by telephone on the date hereof to have remained unaltered since such date. All capitalized terms not otherwise defined herein shall have the meaning set forth in the Liquidity Documents. Based upon the foregoing, we are of the opinion (limited in all respects to the laws of The Netherlands) that: 1. ABN AMRO is duly registered with the Commercial Register of the Amsterdam Chamber of Commerce as (i) a public company with limited liability (naamloze vennootschap), (ii) incorporated on 29 March 1824 and (iii) validly existing under the laws of The Netherlands and has the corporate power under the laws of The Netherlands to enter into the Liquidity Documents and to perform its obligations thereunder through its Chicago Branch. 2. The execution, delivery and performance of the Liquidity Documents by the Chicago Branch of ABN AMRO have been duly authorised by all necessary corporate action on the part of ABN AMRO and do not contravene any provision of applicable law or regulation in The Netherlands or of the Articles of Association and no further authorisation by or any corporate action of ABN AMRO is required in connection with the execution, delivery and performance by it of the Liquidity Documents. 3. Assuming the Liquidity Documents constitute legal, valid and binding obligations under the laws of the State of New York, and assuming due authorisation, execution and delivery thereof by all other parties to such Liquidity Documents, the Liquidity Documents, when executed and delivered by [*] and [*] of ABN AMRO's Chicago Branch, will constitute legal, valid and binding obligations of ABN AMRO enforceable against ABN AMRO in accordance with their terms, except as such enforceability may be limited by bankruptcy, insolvency, liquidation, reorganisation, moratorium or other similar laws affecting the rights of creditors against ABN AMRO generally, as the same may be applied in the event of bankruptcy, insolvency, liquidation or reorganisation of, or other similar occurrence with respect to, ABN AMRO or in the event of a moratorium or similar occurrence affecting ABN AMRO, and subject to the provisions of Chapter X of the Act on the Supervision of the Credit System 1992 (Wet Toezicht Kredietwezen 1992) regarding emergency measures for credit institutions in The Netherlands. 86 -3- 4. No consent or approval of any governmental authority in The Netherlands is required as a condition to the enforceability of ABN AMRO's obligations under the Liquidity Documents. 5 The courts of The Netherlands will observe and give affect to the choice of the laws of the State of New York as the laws governing the Liquidity Documents in any proceedings in relation thereto on the basis and within the scope of and subject to the limitations imposed by the 1980 Rome Convention on the Law Applicable to Contractual Obligations (the "Rome Convention"). With the express reservation that as Dutch lawyers we are not qualified to assess the exact meaning and consequences of the terms of the Liquidity Documents under the laws of the State of New York, on the face of such document we are not aware of any provision that is likely to be manifestly incompatible with Netherlands' public policy (a limitation on the chosen law arising under article 16 Rome Convention) or that is likely to give rise to situations where mandatory rules of Netherlands' law will prevail over the chosen law of such document (a limitation on the chosen law arising under article 7 Rome Convention). It should be noted that we are not aware of any published order, ruling or decision of a Netherlands' court, in which such court has given overriding effect to foreign mandatory rules pertaining to a law other than the chosen (or applicable) law or Netherlands' law (a limitation on the chosen law arising under article 7(1) Rome Convention) in commercial or financial litigation brought before such courts. 6. In the absence of an applicable treaty or convention providing for the recognition and enforcement of judgements in civil and commercial matters which is binding in The Netherlands, a judgement rendered by a foreign court against ABN AMRO will not be recognised and enforced by the courts of The Netherlands and in order to obtain a judgement that is enforceable against ABN AMRO. It will be necessary to relitigate the matter before the competent court of The Netherlands and to submit the judgment rendered by the foreign court in the course of such proceedings, in which case the Netherlands' court may give such effect to the foreign judgment as it deems appropriate. There are no treaties between The Netherlands and the United States of America on the recognition and enforcement of civil or commercial judgments. However, according to current practice, based upon case law, Netherlands' courts will in all probability recognize, give "res judicata" to and render a judgment in accordance with a foreign judgment if and to the extent that the following conditions are met: (i) the foreign court rendering the judgment has jurisdiction over the matter on internationally acceptable grounds (e.g. if the parties have agreed, for example in a contract, to submit their disputes to the foreign court) and has conducted the proceedings in accordance with generally accepted principles of fair trial (e.g. after proper service of process); (ii) the foreign judgment is final and definite; and 87 -4- (iii) such recognition is not in conflict with Netherlands' public policy (i.e. a fundamental principle of Dutch law) or an existing Netherlands' judgment. 7. Assuming that under the laws of the State of New York to which they are expressed to be subject, and any other relevant laws (other than those of The Netherlands) the Liquidity Documents constitute general unsecured and unsubordinated obligations of ABN AMRO, the payment obligations of ABN AMRO under the Liquidity Documents rank at least pari passu with all other unsecured and unsubordinated obligations of ABN AMRO (other than those obligations preferred by mandatory operation of law and with the exception of any rights of set-off or counter-claim which may be asserted against ABN AMRO). 8. Under the laws of The Netherlands, the submission to the jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York and the appellate courts, and the waiver of immunities contained in Section [7.11] of the Revolving Credit Agreement and Section 10.11 of the Intercreditor Agreement constitutes an effective submission by ABN AMBO to the jurisdiction of such courts. The opinions expressed above are subject to the following assumptions: (1) the Liquidity Documents have been or will be executed in a form the same in all material respects as the drafts that we have reviewed for the purpose of rendering this opinion; (2) that each party to the Liquidity Documents (other than ABN AMRO) is duly incorporated and organized, and validly existing and in good standing (where such concept is legally relevant) under the laws of its jurisdiction of incorporation and the jurisdiction of its place of business; and (3) that all signatures on original documents are genuine and all photocopies conform to the originals. We express no opinion as to matters governed by any law other than the laws of The Netherlands. This opinion is addressed to you and may not be relied upon by any other person. Without limiting the foregoing, this opinion may not be published, transmitted or otherwise communicated to, or filed with, any person, firm, company or institution, unless we have given our prior explicit written consent thereto in each instance. This opinion shall be governed by, be construed in accordance with and be limited to the law of The Netherlands. Yours sincerely, Th.A.L. Kliebisch Clifford Chance 88 EXHIBIT F-3 Form of Opinion of In-house Legal Counsel to the Class B and C Liquidity Provider 89 laws of general applicability relating to or affecting creditors' rights and to general equity principles. (5) Neither Morgan Stanley nor MSDWD is required to obtain any authorization, consent, approval, exemption or license from, or to file any registration with, any governmental authority of the United States of America or the State of New York as a condition to the validity of, or for the execution and delivery of the Liquidity Agreements or the Guarantee, to the performance by Morgan Stanley or MSDWD of its obligations thereunder. (6) The execution, delivery and performance of the Liquidity Agreements by Morgan Stanley and the Guarantee by MSDWD will not contravene or constitute a default under any statute, regulation, rule, order or judgment or any governmental authority of the United States of America or the State of New York, or under any provision of the Certificate of Incorporation or By-Laws of Morgan Stanley or MSDWD. In connection with my opinion set forth in paragraph (4) above, I note that, as of the date of this opinion, a judgment for money in an action in a Federal or state court in the United States ordinarily would be enforced in the United States only in United States dollars. The date used to determine the rate of conversion of a foreign currency into United States dollars will depend upon various factors, including which court renders the judgment. Under Section 27 of the New York Judiciary Law, a state court in the State of New York rendering a judgment on an obligation required to be paid in a foreign currency would be required to render such judgment in such foreign currency, and such judgment would be converted into United States dollars at the exchange rate prevailing on the date of entry of the judgment. The foregoing opinion is limited to the Federal laws of the United States, the laws of the State of New York and the General Corporation Law of the State of Delaware, and I am expressing no opinion as to the effect of the laws of any other jurisdiction. With your approval, I have relied as to certain matters on information obtained from public officials, officers of Morgan Stanley and MSDWD and other sources believed by me to be responsible, and I have assumed that the signatures on all documents examined by me are genuine, assumptions which I have not independently verified. I am furnishing this opinion to you solely for your benefit in connection with the above-referenced agreement. Except for your own internal use, this opinion is not to be used or circulated, quoted or otherwise referred to, or relied upon without my express consent. Very truly yours, Counsel 2 90 EXHIBIT F-4 Form of Opinion of Shearman & Sterling, Counsel to the Placement Agents 91 [SHEARMAN & STERLING LETTERHEAD] February 9, 1998 To the Addressees listed on Schedule A attached hereto Atlas Air, Inc. $538,915,000 Pass Through Certificates, Series 1998-1 ----------------------------------------------------- Ladies and Gentlemen: We have acted as special counsel to Morgan Stanley & Co. Incorporated, BT Alex. Brown Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co. (collectively, the "Placement Agents") in connection with the purchase by the Placement Agents, subject to the terms and conditions of the Placement Agreement dated January 27, 1998 (the "Placement Agreement"), among the Placement Agents and Atlas Air, Inc., a Delaware corporation (the "Company"), of $538,915,000 aggregate principal amount of Pass Through Certificates, Series 1998-1 (the "Certificates"), having the aggregate principal amounts, interest rates and final distribution dates set forth in Schedule A to the Placement Agreement, issued by Wilmington Trust Company ("WTC"), not in its individual capacity but solely as Trustee (the "Trustee") of Atlas Air Pass Through Trust 1998-1A-O (the "Class A Trust"), Atlas Air Pass Through Trust 1998-1B-O (the "Class B Trust") and Atlas Air Pass Through Trust 1998-1C-O (the "Class C Trust" and, collectively with the Class A Trust and Class B Trust, the "Trusts") created pursuant to three separate Pass Through Trust Agreements, each dated as of February 29, 1998 (the "Pass Through Trust Agreements"), between the Company and the Trustee. 92 Certain amounts of interest payable on the Certificates will enjoy the benefit of separate liquidity facilities. In the case of the Class B Trust and the Class C Trust, Morgan Stanley Capital Services, Inc. (the "Class B and C Liquidity Provider") has entered into (i) that certain Revolving Credit Agreement (1998-1B) and that certain Revolving Credit Agreement (1998-1C) (collectively, the "Class B and C Liquidity Facilities"), each dated as of February 9, 1998, between WTC (as Subordination Agent, as agent and as trustee for the Class B Trust and the Class C Trust, as the case may be) as Borrower, and the Class B and C Liquidity Provider, and (ii) that certain Intercreditor Agreement, dated as of February 9, 1998 (the "Intercreditor Agreement"), among WTC, not in its individual capacity except as expressly provided therein, but solely as Trustee under the Trusts; ABN AMRO Bank N.V., acting through its Chicago Branch, and the Class B and C Liquidity Provider, as Liquidity Providers; and WTC, not in its individual capacity except as expressly provided therein, but solely as Subordination Agent and Trustee (the Class B and C Liquidity Facilities and the Intercreditor Agreement being referred to collectively as the "Class B and C Liquidity Documents"). This opinion is furnished pursuant to the Section 3(h) of the Placement Agreement. Capitalized terms used and not otherwise defined herein have the respective meanings set forth in the Class B and C Liquidity Documents. In connection with our opinion herein, we have participated in the preparation of, or have examined, the Class B and C Liquidity Documents. We have also examined and relied as to factual matters upon the representations and warranties contained in or made pursuant to such documents, and upon the originals, or copies certified or otherwise identified to our satisfaction, of such records, documents, certificates and other instruments as in our judgment are necessary or appropriate to enable us to render the opinion expressed below. In such examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. We have also assumed that the Class B and C Liquidity Documents have been duly authorized, executed and delivered by each party thereto and, except as covered by our opinion set forth below, that the Class B and C Liquidity Documents constitute the legal, valid and binding obligations of each such party enforceable against such party in accordance with their respective terms. Our opinion is limited to the law of the State of New York, the General Corporation Law of the State of Delaware and the federal law of the United States, and we do not express any opinion herein concerning any other law. Based upon and subject to the foregoing, we are of the opinion that each of the Class B and C Liquidity Documents constitutes the legal, valid and binding obligation of the Class B and C Liquidity Provider, enforceable against such party in accordance with its terms, except as (x) enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or other similar laws affecting enforcement of creditors' rights generally and (y) 93 enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law). We are furnishing this letter to you solely for your benefit. This opinion letter is not to be used, circulated, quoted or otherwise referred to for any other purpose. Very truly yours, 94 EXHIBIT G-1 Form of Opinion of Vedder, Price, Kaufman & Kammholz, U.S. Counsel to the Depositary 95 February __, 1998 To the Addresses Listed on Exhibit A Attached Hereto RE: ATLAS AIR, INC. PASS THROUGH CERTIFICATES, SERIES 1998-1 Ladies and Gentlemen: We have acted as special counsel to ABN AMRO Bank N.V., Chicago Branch ("ABN AMRO") in connection with the transactions contemplated by each of Deposit Agreement (Class A), Deposit Agreement (Class B) and Deposit Agreement (Class C) in each case dates as of ______________, 1998 (the "Deposit Agreements") and between Wilmington Trust Company, not in its individual capacity except as expressly provided therein, but solely as Escrow Agent and ABN AMRO, as Depositary. Except as otherwise noted herein, all capitalized terms used herein shall have the respective defined meanings set forth in the Deposit Agreements. In connection with our opinion herein, we have (i) examined executed counterparts of the Deposit Agreements, (ii) relied without independent investigation or verification, upon the representations and warranties as to factual matters contained in each of the Operative Agreements and upon originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, documents and other instruments as we have deemed relevant to the rendering of this opinion, and (iii) in such examination assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. Based upon and subject to the foregoing, it is our opinion that: 1. Each of the Deposit Agreements constitutes the legal, valid and binding obligation of ABN AMRO enforceable against it in accordance with its terms, except as such enforceability is limited by (i) bankruptcy, receivership, convervatorship, insolvency, fraudulent transfer, liquidation, reorganization, moratorium or other laws affecting creditors' rights and 96 VEDDER PRICE remedies generally from time to time in effect as the same may be applied in the event of the bankruptcy, receivership, conservatorship, insolvency, moratorium,liquidation, reorganization or similar situation of any such party, or other similar occurrence with respect to any such party or by laws affecting the rights of creditors of depository institutions, (ii) the possible judicial application of foreign laws or governmental action affecting creditors' rights generally, (iii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law), public policy and applicable law relating to fiduciary duties, and (iv) any implied covenant of good faith and fair dealing. 2. ABN AMRO Bank N.V. is licensed by the Office of Banks and Real Estate of the State of Illinois to maintain its branch at 135 LaSalle Street, Chicago, Illinois (the "Branch"), in accordance with the banking law of the State of Illinois and the Branch has the full power, authority and legal right to execute and deliver the Deposit Agreements. 3. The execution, delivery and performance by ABN AMRO of the Deposit Agreements, and the consummation of the transactions contemplated therein do not violate any banking law, or any governmental rule or regulation relating thereto, of the United States of America, the State of Illinois or the State of New York. 4. No authorization, consent, approval or other action by, and no notice to or filing with, any banking authority or regulatory body of the United States of America, the State of Illinois or the State of New York is required for the due execution, delivery and performance by ABN AMRO of the Deposit Agreements other than administrative and ministerial filings which ABN AMRO is obligated to make in the ordinary course of its business (which filings we have assumed have been and will continue to be made in a timely manner). 5. The payment obligations of ABN AMRO under the Deposit Agreements constitute unsecured and unsubordinated obligations of ABN AMRO. No opinion is given herein as to (i) the availability of specific performance or equitable relief of any kind or (ii) any federal or state securities laws. In rendering the opinions set forth above, we have assumed that each of the parties to the Deposit Agreements has the full power, authority and legal right to enter into the Deposit Agreements and that the Deposit Agreements have been duly authorized, executed and delivered by each of such parties. WE NOTE THAT THE OPERATIONS OF ABN AMRO ARE SUBJECT TO THE LAWS AND REGULATIONS OF THE STATE OF ILLINOIS, INCLUDING THE LAWS AND REGULATIONS GOVERNING BANK DEPOSITS AND COLLECTIONS. We further express no opinion as to the validity, binding effect or enforceability of (i) purported waivers of any statutory or others rights, court rules or defenses to obligations or 97 VEDDER PRICE remedies generally from time to time in effect as the same may be applied in the event of the bankruptcy, receivership, conservatorship, insolvency, moratorium, liquidation, reorganization or similar situation of any such party, or other similar occurrence with respect to any such party or by laws affecting the rights of creditors of depository institutions, (ii) the possible judicial application of foreign laws of governmental action affecting creditors' rights generally, (iii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law), public policy and applicable law relating to fiduciary duties, and (iv) any implied covenant of good faith and fair dealing. 2. ABN AMRO Bank N.V. is licensed by the Office of Banks and Real Estate of the State of Illinois to maintain its branch at 135 LaSalle Street, Chicago, Illinois (the "Branch"), in accordance with the banking law of the State of Illinois and the Branch has the full power, authority and legal right to execute and deliver the Deposit Agreements. 3. The Execution, delivery and performance by ABN AMRO of the Deposit Agreements, and the consummation of the transactions contemplated therein do not violate any banking law, or any governmental rule or regulation relating thereto, of the United States of America, the State of Illinois or the State of New York. 4. No authorization, consent, approval or other action by, and no notice to or filing with, any banking authority or regulatory body of the United States of America, the State of Illinois or the State of New York is required for the due execution, delivery and performance by ABN AMRO of the Deposit Agreements other than administrative and ministerial filings which ABN AMRO is obligated to make in the ordinary course of its business (which filing we have assumed have been and will continue to be made in a timely manner). 5. The payment obligations of ABN AMRO under the Deposit Agreements constitute unsecured and unsubordinated obligations of ABN AMRO. No opinion is given herein as to (i) the availability of specific performance or equitable relief of any kind or (ii) any federal or state securities laws. In rendering the opinions set forth above, we have assumed that each of the parties to the Deposit Agreements has the full power, authority and legal right to enter into the Deposit Agreements and that the Deposit Agreements have been duly authorized, executed and delivered by each of such parties. We note that the operations of ABN AMRO are subject to the laws and regulations of the State of Illinois, including the laws and regulations governing bank deposits and collections and in the event of a conflict between Illinois law and New York law regarding bank deposits and collections, Illinois law would prevail. 98 VEDDER PRICE consents to any actions where such waivers and consents (A) are against public policy or (B) constitute waivers of rights or consents to actions which by law, regulation or judicial decision may not otherwise be waived or given, (ii) provisions indemnifying any person against, or relieving any person of liability for, its own negligent or wrongful acts or in any other circumstances where enforcement of such provisions would be against public policy or limited or prohibited by applicable law, (iii) any provisions which purport to authorize or permit any person to act in a manner which is determined not to be in good faith or commercially reasonable or any provisions which purport to waive any rights in respect of such acts, (iv) any provisions which purport to authorize or permit any person to exercise any right or remedy upon any nonmaterial breach or default, (v) any forum selection provision, (vi) any powers of attorney to the extent that they purport to grant rights and powers that may not be granted under applicable law, (vii) any right or obligation to the extent that the same may be varied by course of dealing or performance, or (viii) any provision that is subject to any mutual mistake of fact or misunderstanding, fraud, duress or undue influence. This opinion is rendered to you for your benefit and may not be relied upon by any other person, or by you for any other purpose, without our express written consent. We do not express herein any opinion as to any matters governed by any law other than the laws of the State of New York, the State of Illinois and the Federal law of the United States. This opinion is given as of the date hereof and we assume no obligation to advise you of any change which may hereafter be brought to our attention. Very truly yours, DNG:DAW 99 EXHIBIT G-2 Form of Opinion of Clifford Chance, Netherlands Counsel to the Depositary 100 Draft no (1) MMVK/TAK [*] January 1998 To: The Persons Listed on the Schedule hereto Dear Sirs, Atlas Air Pass Through Certificates Series 1998-1 We have acted as Dutch legal counsel to ABN AMRO Bank N.V. ("ABN AMRO"), acting through its Chicago Branch, in connection with the deposit agreement 1988-1 dated as of [*] January 1998 (the "DEPOSIT AGREEMENT") by and between [ESCROW AGENT] ("[*]"), as Escrow Agent and ABN AMRO, Chicago Branch as Depositary (the Deposit Agreement, the Placement Agreement (as defined hereunder) and the Indemnity Agreement (as defined hereunder) are hereinafter collectively referred to as the "TRANSACTION DOCUMENTS"). This opinion is being furnished at your specific request. In such capacity, we have examined the following documents, as well as such other documents and instruments as we have deemed necessary or advisable for the purposes of this opinion: (a) a draft of the Deposit Agreement dated 26 November 1997; (c) a draft of the indemnity agreement dated 26 November 1997 (the "INDEMNITY AGREEMENT"); 101 - 2 - (d) a copy of the articles of association (statuten) of ABN AMRO as they stand on the date hereof since their latest amendment dated 21 September 1991, being the currently effective articles of association according to the extract referred to in (c) below (the "Articles of Association"); and (e) a copy of an official summary extract (beperkt minreksel) dated 19 December 1997 from the Commercial Register of the Chamber of Commerce of Amsterdam relating to the registration of ABN AMRO under number 332587 and confirmed to us by the Chamber of Commerce of Amsterdam by telephone on the date hereof to have remained unaltered since such date. All capitalized terms not otherwise defined herein shall have the meaning set forth in the Transaction Documents. Based upon the foregoing, we are of the opinion (limited in all respects to the laws of The Netherlands) that: 1. ABN AMRO is duly registered with the Commercial Register of the Amsterdam Chamber of Commerce as (i) a public company with limited liability (noamlace vennootschap), (ii) incorporated on 29 March 1824 and (iii) validly existing under the laws of The Netherlands and has the corporate power under the laws of The Netherlands to enter into the Transaction Documents and to perform its obligations thereunder through its Chicago Branch. 2. The execution, delivery and performance of the Transaction Documents by the Chicago Branch of ABN AMRO have been duly authorized by all necessary corporate action on the part of ABN AMRO and do not contravene any provision of applicable law or regulation in The Netherlands or of the Articles of Association and no further authorisation by or any corporate action of ABN AMRO is required in connection with the execution, delivery and performance by it of the Transaction Documents. 3. Assuming the Transaction Documents constitute legal, valid and binding obligations under the laws of the State of New York, and assuming due authorisation, execution and delivery thereof by all other parties to such Transaction Documents, the Transaction Documents, when executed and delivered by [*] and [*] of ABN AMRO's Chicago Branch, will constitute legal, valid and binding obligations of ABN AMRO enforceable against ABN AMRO in accordance with their terms, except as such enforceability may be limited by bankruptcy, insolvency, liquidation, reorganisation, moratorium or other similar laws affecting the rights of creditors against ABN AMRO generally, as the same may be applied in the event of bankruptcy, insolvency, liquidation or reorganisation of, or other similar occurrence with respect to, ABN AMRO or in the event of a moratorium or similar occurrence affecting ABN AMRO, and subject to the provisions of Chapter X of the Act on the Supervision of the Credit System 1992 (Wet Toericht Kredistwezen 1992) regarding emergency measures for credit institutions in The Netherlands. 102 - 3 - 4. No consent, approval, authorization or order of, or filing with any governmental authority or body or any court in The Netherlands is required as a condition to the enforceability of ABN AMRO's obligations under the Transaction Documents. 5. The courts of The Netherlands will observe and give effect to the choice of the laws of the State of New York as the laws governing the Transaction Documents in any proceedings in relation thereto on the basis and within the scope of and subject to the limitations imposed by the 1980 Rome Convention on the Law Applicable to Contractual Obligations (the "Rome Convention"). With the express reservation that as Dutch lawyers we are not qualified to assess the exact meaning and consequences of the terms of the Transaction Documents under the laws of the State of New York, on the face of such document we are not aware of any provision that is likely to be manifestly incompatible with Netherlands' public policy (a limitation on the chosen law arising under article 16 Rome Convention) or that is likely to give rise to situations where mandatory rules of Netherlands' law will prevail over the chosen law of such document (a limitation on the chosen law arising under article 7 Rome Convention). It should also be noted that we are not aware of any published order, ruling or decision of a Netherlands' court, in which such a court has given overriding effect to foreign mandatory rules pertaining to a law other than the chosen (or applicable) law or Netherland's law (a limitation on the chosen law arising under article 7 (1) Rome Convention) in commercial or financial litigation brought before such courts. 6. In the absence of an applicable treaty or convention providing for the recognition and enforcement of judgments in civil and commercial matters which is binding in The Netherlands, a judgment rendered by a foreign court against ABN AMRO will not be recognised and enforced by the courts of The Netherlands and in order to obtain a judgment that is enforceable against ABN AMRO, it will be necessary to relitigate the matter before the competent court of The Netherlands and to submit the judgment rendered by the foreign court in the course of such proceedings, in which case the Netherlands' court may give such effect to the foreign judgment as it deems appropriate. There are no treaties between The Netherlands and the United States of America on the recognition and enforcement of civil or commercial judgments. However, according to current practice, based upon case law, Netherlands' courts will in all probability recognize, give "jus judicata" to and render a judgment in accordance with a foreign judgment if and to the extent that the following conditions are met: (i) the foreign court rendering the judgment has jurisdiction over the matter on internationally acceptable grounds (e.g. if the parties have agreed, for example in a contract, to submit their disputes to the foreign court) and has conducted the proceedings in accordance with generally accepted principles of fair trial (e.g. after proper service of process); (ii) the foreign judgment is final and definite; and 103 -4- (iii) such recognition is not in conflict with Netherlands' public policy (i.e. a fundamental principle of Dutch law) or an existing Netherlands' judgment. 7. Assuming that under the laws of the State of New York to which they are expressed to be subject, and any other relevant laws (other than those of The Netherlands) the Transaction Documents constitute general unsecured and unsubordinated obligations of ABN AMRO, the payment obligations of ABN AMRO under the Transaction Documents rank at least pari passu with all other unsecured and unsubordinated obligations of ABN AMRO (other than those obligations preferred by mandatory operation of law and with the exception of any rights of set-off or counter-claim which may be asserted against ABN AMRO). 8. Each party to the Transaction Documents will alternatively be able to proceed directly against ABN AMRO's Head Office in Amsterdam, The Netherlands, if ABN AMRO's Chicago Branch defaults in its obligation to such party under the Transaction Documents. [9. Payments of interest and principal in respect of the Deposits in the United States are not subject under the laws of The Netherlands or any political subdivision thereof to any withholdings or similar charges or deductions, provided the payments are made by ABN AMRO's Chicago Branch.] The opinions expressed are subject to the following assumptions: (1) the Transaction Documents have been or will be executed in a form the same in all material respects as the drafts that we have reviewed for the purpose of rendering this opinion; (2) that each party to the Transaction Documents (other than ABN AMRO) is duly incorporated and organised, and validly existing and in good standing (where such concept is legally relevant) under the laws of its jurisdiction of incorporation and the jurisdiction of its place of business; and (3) that all signatures on original documents are genuine and all photocopies conform to the originals. We express no opinion as to matters governed by any law other than the laws of The Netherlands. This opinion is addressed to you and may not be relied upon by any other person. Without limiting the foregoing, this opinion may not be published, transmitted or otherwise communicated to, or filed with, any person, firm, company or institution, unless we have given out prior explicit written consent thereto in each instance. This opinion shall be governed by, be construed in accordance with and be limited to the law of The Netherlands. EX-10.89 3 REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 10.89 EXECUTION COPY ================================================================================ ATLAS AIR, INC., ISSUER Pass Through Certificates Series 1998-1 REGISTRATION RIGHTS AGREEMENT Dated: February 9, 1998 ================================================================================ 2 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered into February 9, 1998, among ATLAS AIR, INC., a Delaware corporation (the "Company"), MORGAN STANLEY & CO. INCORPORATED ("Morgan Stanley"), BT ALEX. BROWN INCORPORATED, DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION and GOLDMAN, SACHS & CO. (collectively with Morgan Stanley, the "Placement Agents"). This Agreement is made pursuant to the Placement Agreement dated January 27, 1998, among the Company and the Placement Agents (the "Placement Agreement"), which provides for the sale by the Trustee (as defined below) to the Placement Agents of (i) $300,254,000 aggregate principal amount of 7.38% 1998-1A Pass Through Certificates (the "Class A Certificates"), (ii) $115,481,000 aggregate principal amount of 7.68% 1998-1B Pass Through Certificates (the "Class B Certificates") and (iii) $123,180,000 aggregate principal amount of 8.01% 1998-1C Pass Through Certificates (the "Class C Certificates, and together with the Class A Certificates and the Class B Certificates, the "Certificates"). In order to induce the Placement Agents to enter into the Placement Agreement, the Company has agreed to provide to the Placement Agents and their direct and indirect transferees the registration rights set forth in this Agreement. The execution of this Agreement is a condition to the closing under the Placement Agreement. The Certificates will be issued pursuant to three separate pass through trust agreements, each to be dated as of February 9, 1998 (collectively the "Original Pass Through Trust Agreements") between the Company and Wilmington Trust Company, as trustee under each of the Original Trusts (as defined below) (each a "Trustee"). The Original Pass Through Trust Agreements are related to the creation and administration of Atlas Air, Inc. Pass Through Trust Series 1998-1A-O (the "Class A Trust"), Atlas Air, Inc. Pass Through Trust Series 1998-1B-O (the "Class B Trust") and Atlas Air, Inc. Pass Through Trust Series 1998-1C-O (the "Class C Trust"; and together with the Class A Trust and the Class B Trust and the Class C Trust, the "Original Trusts"). The cash proceeds of the offering of Certificates by each Original Trust will be paid to First Security Bank, National Association., as escrow agent (the "Escrow Agent"), under an Escrow and Paying Agent Agreement among the Escrow Agent, the Placement Agents, the Trustee of such Original Trust and Wilmington Trust Company, as paying agent (the "Paying Agent"), for the benefit of the holders of Offered Certificates issued by such Original Trust. The Escrow Agent will deposit such cash proceeds (each, a "Deposit") with the Depositary, in accordance with a Deposit Agreement relating to such Original Trust (each, a "Deposit Agreement"), and will withdraw Deposits upon request to allow the Trustee to purchase Equipment Notes (as defined in the Note Purchase Agreement defined below) referred to herein from time to time pursuant to a Note Purchase Agreement (the "Note Purchase Agreement") to be dated as of the Closing Date (as defined in the Placement 3 2 Agreement) among the Company, Wilmington Trust Company, as Trustee of each of the Original Trusts, as Subordination Agent and as Paying Agent, and the Escrow Agent. Each Escrow Agent will issue receipts to be attached to each related Certificate representing each holder's fractional undivided interest in amounts deposited with such Escrow Agent and will pay to such holders through the related Paying Agent interest accrued on the Deposits and received by such Paying Agent pursuant to the related Deposit Agreement at a rate per annum equal to the interest rate applicable to the corresponding Certificates. On the Trust Transfer Date (as defined in the Placement Agreement), each of the Original Trusts will transfer and assign all of its assets and rights to a newly-created successor trust with substantially identical terms except as described in the Final Memorandum (as defined in the Placement Agreement) (each, a "Successor Trust" and, together with the Original Trusts, the "Trusts") governed by three separate pass through trust agreements (collectively the "Successor Pass Through Trust Agreements" and, together with the Original Pass Through Trust Agreements, the "Trust Agreements") between the Company and the Trustee. Each Certificate outstanding on the Trust Transfer Date will represent the same interest in the Successor Trust as the Certificate represented in the Original Trust. Wilmington Trust Company initially will also act as trustee of the Successor Trusts (each, a "Successor Trustee"). In consideration of the foregoing, the parties hereto agree as follows: 1. Definitions. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "1933 Act" shall mean the Securities Act of 1933, as amended from time to time. "1934 Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. "Agreement" shall have the meaning set forth in the preamble. "Applicable Trust Agreement" shall mean, (i) with respect to the Class A Certificates, the Class A Holders or the Class A Trustee, the Class A Trust Agreement, (ii) with respect to the Class B Certificates, the Class B Holders or the Class B Trustee, the Class B Trust Agreement and (iii) with respect to the Class C Certificates, the Class C Holders or the Class C Trustee, the Class C Trust Agreement. 4 3 "Certificates" shall have the meaning set forth in the second paragraph of this Agreement. "Class A Certificates" shall have the meaning set forth in the second paragraph of this Agreement. "Class A Exchange Certificates" shall mean securities issued under the Class A Trust Agreement of equal outstanding principal amount as and containing terms identical to the Class A Certificates (except that (i) interest thereon shall accrue from the last date on which interest was paid on the Class A Certificates or, if no such interest has been paid, from February 9, 1998, (ii) the transfer restrictions thereon shall be modified or eliminated, as appropriate and (iii) certain provisions relating to an increase in the stated rate of interest thereon shall be eliminated), to be offered to Holders of the Class A Certificates in exchange for such Class A Certificates pursuant to the Exchange Offer. "Class A Holder" shall mean each Placement Agent, for so long as it owns any Class A Registrable Certificates, and each of its successors, assigns and direct and indirect transferees who become registered owners of Class A Registrable Certificates under the Class A Trust Agreement; provided that for purposes of Sections 4 and 5 of this Agreement, the term "Class A Holder" shall include Participating Broker-Dealers (as defined in Section 4(a)). "Class A Registrable Certificates" shall mean the Class A Certificates; provided, however, that the Class A Certificates shall cease to be Class A Registrable Certificates upon the earlier to occur of (i) the consummation of the Exchange Offer, (ii) a Registration Statement with respect to such Class A Certificates shall have been declared effective under the 1933 Act and such Class A Certificates shall have been disposed of pursuant to such Registration Statement, (iii) such Class A Certificates shall have been sold to the public pursuant to Rule 144(k) (or any similar provision then in force, but not Rule 144A) under the 1933 Act or (iv) such Class A Certificates shall have ceased to be outstanding. "Class A Trust Agreement" shall mean the Pass Through Trust Agreement relating to the Class A Certificates dated as of February 9, 1998 between the Company and the Class A Trustee or, on or after the Trust Transfer Date, the corresponding Successor Pass Through Trust Agreement, as each may be amended from time to time in accordance with the terms thereof. "Class A Trustee" shall mean Wilmington Trust Company, not in its individual capacity except as expressly set forth in the Class A Trust Agreement, but solely as 5 4 Trustee under the Class A Trust Agreement, together with any successor Trustee under the terms of the Class A Trust Agreement. "Class B Certificates" shall have the meaning set forth in the second paragraph of this Agreement. "Class B Exchange Certificates" shall mean securities issued under the Class B Trust Agreement of equal outstanding principal amount as and containing terms identical to the Class B Certificates (except that (i) interest thereon shall accrue from the last date on which interest was paid on the Class B Certificates or, if no such interest has been paid, from February 9, 1998, (ii) the transfer restrictions thereon shall be modified or eliminated, as appropriate and (iii) certain provisions relating to an increase in the stated rate of interest thereon shall be eliminated), to be offered to Holders of the Class B Certificates in exchange for such Class B Certificates pursuant to the Exchange Offer. "Class B Holder" shall mean each Placement Agent, for so long as it owns any Class B Registrable Certificates, and each of its successors, assigns and direct and indirect transferees who become registered owners of Class B Registrable Certificates under the Class B Trust Agreement; provided that for purposes of Sections 4 and 5 of this Agreement, the term "Class B Holder" shall include Participating Broker-Dealers (as defined in Section 4(a)). "Class B Registrable Certificates" shall mean the Class B Certificates; provided, however, that the Class B Certificates shall cease to be Class B Registrable Certificates upon the earlier to occur of (i) the consummation of the Exchange Offer, (ii) a Registration Statement with respect to such Class B Certificates shall have been declared effective under the 1933 Act and such Class B Certificates shall have been disposed of pursuant to such Registration Statement, (iii) such Class B Certificates shall have been sold to the public pursuant to Rule 144(k) (or any similar provision then in force, but not Rule 144A) under the 1933 Act or (iv) such Class B Certificates shall have ceased to be outstanding. "Class B Trust Agreement" shall mean the Pass Through Trust Agreement relating to the Class B Certificates dated as of February 9, 1998 between the Company and the Class B Trustee or, on or after the Trust Transfer Date, the corresponding Successor Pass Through Trust Agreement, as each may be amended from time to time in accordance with the terms thereof. "Class B Trustee" shall mean Wilmington Trust Company, not in its individual capacity except as expressly set forth in the Class B Trust Agreement, but solely as 6 5 Trustee under the Class B Trust Agreement, together with any successor Trustee under the terms of the Class B Trust Agreement. "Class C Certificates" shall have the meaning set forth in the second paragraph of this Agreement. "Class C Exchange Certificates" shall mean securities issued under the Class C Trust Agreement of equal outstanding principal amount as and containing terms identical to the Class C Certificates (except that (i) interest thereon shall accrue from the last date on which interest was paid on the Class C Certificates or, if no such interest has been paid, from February 9, 1998, (ii) the transfer restrictions thereon shall be modified or eliminated, as appropriate and (iii) certain provisions relating to an increase in the stated rate of interest thereon shall be eliminated), to be offered to Holders of the Class C Certificates in exchange for such Class C Certificates pursuant to the Exchange Offer. "Class C Holder" shall mean each Placement Agent, for so long as it owns any Class C Registrable Certificates, and each of its successors, assigns and direct and indirect transferees who become registered owners of Class C Registrable Certificates under the Class C Trust Agreement; provided that for purposes of Sections 4 and 5 of this Agreement, the term "Class C Holder" shall include Participating Broker-Dealers (as defined in Section 4(a)). "Class C Registrable Certificates" shall mean the Class C Certificates; provided, however, that the Class C Certificates shall cease to be Class C Registrable Certificates upon the earlier to occur of (i) the consummation of the Exchange Offer, (ii) a Registration Statement with respect to such Class C Certificates shall have been declared effective under the 1933 Act and such Class C Certificates shall have been disposed of pursuant to such Registration Statement, (iii) such Class C Certificates shall have been sold to the public pursuant to Rule 144(k) (or any similar provision then in force, but not Rule 144A) under the 1933 Act or (iv) such Class C Certificates shall have ceased to be outstanding. "Class C Trust Agreement" shall mean the Pass Through Trust Agreement relating to the Class C Certificates dated as of February 9, 1998 between the Company and the Class C Trustee or, on or after the Trust Transfer Date, the corresponding Successor Pass Through Trust Agreement, as each may be amended from time to time in accordance with the terms thereof. "Class C Trustee" shall mean Wilmington Trust Company, not in its individual capacity except as expressly set forth in the Class C Trust Agreement, but solely as 7 6 Trustee under the Class C Trust Agreement, together with any successor Trustee under the terms of the Class C Trust Agreement. "Closing Date" shall mean the Closing Date as defined in the Placement Agreement. "Company" shall have the meaning set forth in the preamble and shall also include the Company's successors. "Deposit" shall have the meaning set forth in the fourth paragraph of this Agreement. "Deposit Agreement" shall have the meaning set forth in the fourth paragraph of this Agreement. "Depositary" shall have the meaning set forth in the preamble and shall also include the Depositary's successors. "Escrow Agent" shall have the meaning set forth in the fourth paragraph of this Agreement and shall also include the Escrow Agent's successors. "Exchange Offer" shall mean the exchange offer by the Company of Exchange Certificates for Registrable Certificates pursuant to Section 2(a) hereof. "Exchange Offer Registration" shall mean a registration under the 1933 Act effected pursuant to Section 2(a) hereof. "Exchange Offer Registration Statement" shall mean an exchange offer registration statement on Form S-4 (or, if applicable, on another appropriate form) and all amendments and supplements to such registration statement, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Exchange Certificates" shall mean, together, the Class A Exchange Certificates, the Class B Exchange Certificates and the Class C and Exchange Certificates. "Exchange Dates" shall have the meaning set forth in Section 2(a)(ii) of this Agreement. 8 7 "Holder" shall mean a Class A Holder, a Class B Holder or a Class C Holder; provided that for purposes of Sections 4 and 5 of this Agreement, the term "Holder" shall include Participating Broker-Dealers (as defined in Section 4(a)). "Majority Holders" shall mean, together, the Holders of a majority in aggregate principal amount of the of Registrable Certificates then outstanding; provided that whenever the consent or approval of Holders of a specified percentage of Registrable Certificates is required hereunder, Registrable Certificates held by the Company or any of its affiliates (as such term is defined in Rule 405 under the 1933 Act) (other than the Placement Agents or subsequent holders of Registrable Certificates if such subsequent holders are deemed to be such affiliates solely by reason of their holding of such Registrable Certificates) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage or amount. "Morgan Stanley" shall have the meaning set forth in the preamble. "Note Purchase Agreement" shall have the meaning set forth in the fourth paragraph of this Agreement. "Original Pass Through Trust Agreements" shall have the meaning set forth in the third paragraph of this Agreement. "Paying Agent" shall have the meaning set forth in the fourth paragraph of this Agreement and shall also include the Paying Agent's successors. "Person" shall mean an individual, partnership, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. "Placement Agents" shall have the meaning set forth in the preamble. "Placement Agreement" shall have the meaning set forth in the second paragraph of this Agreement. "Prospectus" shall mean the prospectus included in a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including a prospectus supplement with respect to the terms of the offering of any portion of the Registrable Certificates covered by a Shelf Registration Statement, and by all other amendments and supplements to such prospectus, and in each case including all material incorporated by reference therein. 9 8 "Registrable Certificates" shall mean, together, the Class A Registrable Certificates, the Class B Registrable Certificates and the Class C Registrable. "Registration Expenses" shall mean any and all expenses incident to performance of or compliance by the Company with this Agreement, including without limitation: (i) all SEC, stock exchange or National Association of Securities Dealers, Inc. registration and filing fees, (ii) all fees and expenses incurred in connection with compliance with state securities or blue sky laws (including reasonable fees and disbursements of counsel for any underwriters or Holders in connection with blue sky qualification of any of the Exchange Certificates or Registrable Certificates), (iii) all expenses in connection with the printing and distributing of any Registration Statement, any Prospectus and any amendments or supplements thereto, (iv) all rating agency fees, (v) all fees and disbursements relating to the qualification of the Trust Agreements under applicable securities laws, (vi) the fees and disbursements of the Trustees and their counsel, (vii) the fees and disbursements of counsel for the Company and, in the case of a Shelf Registration Statement, the fees and disbursements of one counsel for the Holders (which counsel shall be selected by the Majority Holders and which counsel may also be counsel for the Placement Agents) and (viii) the fees and disbursements of the independent public accountants of the Company, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, but excluding fees and expenses of counsel to the underwriters (other than fees and expenses set forth in clause (ii) above) or the Holders and underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of Registrable Certificates by a Holder. "Registration Statement" shall mean any registration statement of the Company that covers any of the Exchange Certificates or Registrable Certificates pursuant to the provisions of this Agreement and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "SEC" shall mean the Securities and Exchange Commission. "Shelf Registration" shall mean a registration effected pursuant to Section 2(b) hereof. "Shelf Registration Statement" shall mean a "shelf" registration statement of the Company pursuant to the provisions of Section 2(b) of this Agreement which covers all of the Registrable Certificates (but no other securities unless approved by the Holders whose Registrable Certificates are covered by such Shelf Registration 10 9 Statement) on an appropriate form under Rule 415 under the 1933 Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Successor Pass Through Trust Agreements" shall have the meaning set forth in the fifth paragraph of this Agreement. "Successor Trust" shall have the meaning set forth in the fifth paragraph of this Agreement. "Successor Trustee" shall have the meaning set forth in the fifth paragraph of this Agreement and shall also include the Successor Trustee's successors. "TIA" shall have the meaning set forth in Section 3(l) of this Agreement. "Trust Agreement" shall have the meaning set forth in the fifth paragraph of this Agreement. "Trustee" shall have the meaning set forth in the third paragraph of this Agreement and shall also include the Trustee's successors. "Underwritten Registration" or "Underwritten Offering" shall mean a registration in which Registrable Certificates are sold to an Underwriter (as hereinafter defined) for reoffering to the public. 2. Registration Under the 1933 Act. (a) To the extent not prohibited by any applicable law or applicable interpretation of the Staff of the SEC, the Company shall use its best efforts (i) to cause to be filed after the Closing Date an Exchange Offer Registration Statement covering the offer to the Holders to exchange (A) all of the Class A Registrable Certificates for Class A Exchange Certificates, (B) all of the Class B Registrable Certificates for Class B Exchange Certificates, (C) all of the Class C Registrable Certificates for Class C Exchange Certificates (ii) to have such Registration Statement remain effective until the closing of the Exchange Offer. The Company shall commence the Exchange Offer promptly after the Exchange Offer Registration Statement has been declared effective by the SEC and use its best efforts to have the Exchange Offer consummated not later than 60 days after such effective date. The Company shall, or shall cause the Trustees to, commence the Exchange Offer by mailing the related exchange offer Prospectus and accompanying documents to each Holder stating, in addition to such other disclosures as are required by applicable law: 11 10 (i) that the Exchange Offer is being made pursuant to this Registration Rights Agreement and that all Registrable Certificates validly tendered will be accepted for exchange; (ii) the dates of acceptance for exchange (which shall be each business day during a period of at least 30 days from the date such notice is mailed) (the "Exchange Dates"); (iii) that any Registrable Certificate not tendered will remain outstanding and continue to accrue interest, but will not retain any rights under this Registration Rights Agreement; (iv) that Holders electing to have a Registrable Certificate exchanged pursuant to the Exchange Offer will be required to surrender such Registrable Certificate, together with the enclosed letters of transmittal, to the institution and at the address (located in the Borough of Manhattan, The City of New York) specified in the notice prior to the close of business on the last Exchange Date; and (v) that Holders will be entitled to withdraw their election, not later than the close of business on the last Exchange Date, by sending to the institution and at the address (located in the Borough of Manhattan, The City of New York) specified in the notice, a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Registrable Certificates delivered for exchange, and a statement that such Holder is withdrawing his election to have such Certificates exchanged. As soon as practicable after the last Exchange Date, the Company shall or shall cause the Trustees to: (i) accept for exchange Registrable Certificates or portions thereof tendered and not validly withdrawn pursuant to the Exchange Offer; (ii) deliver, or cause to be delivered, to the Class A Trustee for cancellation all Class A Registrable Certificates or portions thereof so accepted for exchange by the Company, and issue, and cause the Class A Trustee to promptly authenticate and mail to each Class A Holder, Class A Exchange Certificates equal in principal amount to the principal amount of the Class A Registrable Certificates surrendered by such Class A Holder; (iii) deliver, or cause to be delivered, to the Class B Trustee for cancellation all Class B Registrable Certificates or portions thereof so accepted for exchange by the Company, and issue, and cause the Class B Trustee to promptly 12 11 authenticate and mail to each Class B Holder, Class B Exchange Certificates equal in principal amount to the principal amount of the Class B Registrable Certificates surrendered by such Class B Holder; and (iv) deliver, or cause to be delivered, to the Class C Trustee for cancellation all Class C Registrable Certificates or portions thereof so accepted for exchange by the Company, and issue, and cause the Class C Trustee to promptly authenticate and mail to each Class C Holder, Class C Exchange Certificates equal in principal amount to the principal amount of the Class C Registrable Certificates surrendered by such Class C Holder. The Company shall use its best efforts to complete the Exchange Offer as provided above and shall comply with the applicable requirements of the 1933 Act, the 1934 Act and other applicable laws, rules and regulations in connection with the Exchange Offer. The Exchange Offer shall not be subject to any conditions, other than that the Exchange Offer does not violate applicable law or any applicable interpretation of the Staff of the SEC. The Company shall inform the Placement Agents of the names and addresses of the Holders to whom the Exchange Offer is made, and the Placement Agents shall have the right, subject to applicable law, to contact such Holders and otherwise facilitate the tender of Registrable Certificates in the Exchange Offer. (b) In the event that (i) the Company determines that the Exchange Offer Registration provided for in Section 2(a) above is not available or may not be consummated as soon as practicable after the last Exchange Date because it would violate applicable law or the applicable interpretations of the Staff of the SEC, (ii) the Exchange Offer is not for any other reason consummated within 30 days of the effectiveness of an Exchange Offer Registration Statement or (iii) the Exchange Offer has been completed and in the opinion of counsel for the Placement Agents a Registration Statement must be filed and a Prospectus must be delivered by the Placement Agents in connection with any offering or sale of Registrable Certificates, the Company shall use its best efforts to cause to be filed as soon as practicable after such determination, date or notice of such opinion of counsel is given to the Company, as the case may be, a Shelf Registration Statement providing for the sale by the Holders of all of the Registrable Certificates, and to have such Shelf Registration Statement declared effective by the SEC. The Company agrees to use its best efforts to keep the Shelf Registration Statement continuously effective until the second anniversary of the Closing Date or such shorter period that will terminate when all of the Registrable Certificates covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement. The Company further agrees to supplement or amend the Shelf Registration Statement, if required by the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration Statement or by the 1933 Act or by any other rules and regulations thereunder for shelf registration or if reasonably requested by a Holder with respect to information relating to such Holder, and to use its best efforts to cause any such 13 12 amendment to become effective and such Shelf Registration Statement to become usable as soon as thereafter practicable. The Company agrees to furnish to the Holders of Registrable Certificates copies of any such supplement or amendment promptly after its being used or filed with the SEC. (c) The Company shall pay all Registration Expenses in connection with the registration pursuant to Section 2(a) or Section 2(b). Each Holder shall pay all underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder's Registrable Certificates pursuant to the Shelf Registration Statement. (d) An Exchange Offer Registration Statement pursuant to Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof will not be deemed to have become effective unless it has been declared effective by the SEC; provided, however, that if, after it has been declared effective, the offering of Registrable Certificates pursuant to a Shelf Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, such Shelf Registration Statement will be deemed not to have become effective during the period of such interference until the offering of Registrable Certificates pursuant to such Registration Statement may legally resume. In the event that neither the consummation of the Exchange Offer nor the declaration by the Commission of a Shelf Registration to be effective (each a "Registration Event") occurs on or prior to the 180th day after the date of the issuance of the Registrable Certificates, the interest rate per annum borne by the Certificates shall be increased by 0.50%, effective from and including August 9, 1998, to but excluding the date on which a Registration Event occurs. In the event that the Shelf Registration Statement ceases to be effective at any time during the period specified by Section 2(b) hereof for more than 60 days, whether or not consecutive, during any 12-month period, the interest rate borne by the Certificates shall be increased by 0.50% per annum from the 61st day of the applicable 12-month period such Shelf Registration Statement ceases to be effective until such time as the Shelf Registration Statement again becomes effective. (e) Without limiting the remedies available to the Placement Agents and the Holders, the Company acknowledges that any failure by the Company to comply with its obligations under Section 2(a) and Section 2(b) hereof may result in material irreparable injury to the Placement Agents or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, each Placement Agent or any Holder may obtain such relief as may be required to specifically enforce the Company's obligations under Section 2(a) and Section 2(b) hereof. 14 13 3. Registration Procedures. In connection with the obligations of the Company with respect to the Registration Statements pursuant to Section 2(a) and Section 2(b) hereof, the Company shall as expeditiously as possible: (a) prepare and file with the SEC a Registration Statement on the appropriate form under the 1933 Act, which form (x) shall be selected by the Company and (y) shall, in the case of a Shelf Registration, be available for the sale of the Registrable Certificates by the selling Holders thereof and (z) shall comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the SEC to be filed therewith, and use its best efforts to cause such Registration Statement to become effective and remain effective in accordance with Section 2 hereof; (b) prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary to (x) keep such Registration Statement effective for the applicable period under this Registration Rights Agreement, and (y) cause each Prospectus to be supplemented by any required prospectus supplement and, as so supplemented, to be filed pursuant to Rule 424 under the 1933 Act and (z) keep each Prospectus current during the period described under Section 4(3) and Rule 174 under the 1933 Act that is applicable to transactions by brokers or dealers with respect to the Registrable Certificates or Exchange Certificates; (c) in the case of a Shelf Registration, furnish to each Holder of Registrable Certificates, to counsel for the Placement Agents, to counsel for the Holders and to each Underwriter of an Underwritten Offering of Registrable Certificates, if any, and each such Underwriter's Counsel, without charge, as many copies of each Prospectus, including each preliminary Prospectus, and any amendment or supplement thereto and such other documents as such Holder or Underwriter may reasonably request, in order to facilitate the public sale or other disposition of the Registrable Certificates; and the Company consents to the use of such Prospectus and any amendment or supplement thereto in accordance with applicable law by each of the selling Holders of Registrable Certificates and any such Underwriters in connection with the offering and sale of the Registrable Certificates covered by and in the manner described in such Prospectus or any amendment or supplement thereto in accordance with applicable law; (d) use its best efforts to register or qualify the Registrable Certificates under all applicable state securities or "blue sky" laws of such jurisdictions as any Holder of Registrable Certificates covered by a Registration Statement shall reasonably request in writing by the time the applicable Registration Statement is declared effective by the SEC, to cooperate with such Holders in connection with any 15 14 filings required to be made with the National Association of Securities Dealers, Inc. and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder to consummate the disposition in each such jurisdiction of such Registrable Certificates owned by such Holder; provided, however, that the Company shall not be required to (i) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (ii) file any general consent to service of process or (iii) subject itself to taxation in any such jurisdiction if it is not so subject; (e) in the case of a Shelf Registration, notify each Holder of Registrable Certificates, counsel for the Holders and counsel for the Placement Agents promptly and, if requested by any such Holder or counsel, confirm such advice in writing, (i) when a Registration Statement has become effective and when any post-effective amendment thereto have been filed and become effective, (ii) of any request by the SEC or any state securities authority for amendments and supplements to a Registration Statement and Prospectus or for additional information after the Registration Statement has become effective, (iii) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (iv) if, between the effective date of a Registration Statement and the closing of any sale of Registrable Certificates covered thereby, the representations and warranties of the Company contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to such offering cease to be true and correct in all material respects or if the Company receives any notification with respect to the suspension of the qualification of the Registrable Certificates for sale in any jurisdiction or the initiation of any proceeding for such purpose, (v) of the happening of any event during the period a Shelf Registration Statement is effective which makes any statement made in such Registration Statement or the related Prospectus untrue in any material respect or which requires the making of any changes in such Registration Statement or Prospectus in order to make the statements therein not misleading, and (vi) of any determination by the Company that a post-effective amendment to a Registration Statement would be appropriate; (f) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement at the earliest possible moment and provide immediate notice to each Holder of the withdrawal of any such order; (g) in the case of a Shelf Registration, furnish to each Holder of Registrable Certificates, without charge, at least one conformed copy of each 16 15 Registration Statement and any post-effective amendment thereto (without documents incorporated therein by reference or exhibits thereto, unless requested); (h) in the case of a Shelf Registration, cooperate with the selling Holders of Registrable Certificates to facilitate the timely preparation and delivery of certificates representing Registrable Certificates to be sold and not bearing any restrictive legends and enable such Registrable Certificates to be in such denominations (consistent with the provisions of the Applicable Trust Agreement) and registered in such names as the selling Holders may reasonably request at least two business days prior to the closing of any sale of Registrable Certificates; (i) in the case of a Shelf Registration, upon the occurrence of any event contemplated by Section 3(e)(v) hereof, use its best efforts to prepare and file with the SEC a supplement or post-effective amendment to a Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Certificates, such Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; the Company agrees to notify the Holders to suspend use of the Prospectus as promptly as practicable after the occurrence of such an event, and the Holders hereby agree to suspend use of the Prospectus until the Company has amended or supplemented the Prospectus to correct such misstatement or omission; (j) a reasonable time prior to the filing of any Registration Statement, any Prospectus, any amendment to a Registration Statement or amendment or supplement to a Prospectus or any document which is to be incorporated by reference into a Registration Statement or a Prospectus after initial filing of a Registration Statement, provide copies of such document to the Placement Agents and their counsel (and, in the case of a Shelf Registration Statement, the Holders and their counsel) and make such of the representatives of the Company as shall be reasonably requested by the Placement Agents or their counsel (and, in the case of a Shelf Registration Statement, the Holders or their counsel) available for discussion of such document, and shall not at any time file or make any amendment to the Registration Statement, any Prospectus or any amendment of or supplement to a Registration Statement or a Prospectus or any document which is to be incorporated by reference into a Registration Statement or a Prospectus, of which the Placement Agents and their counsel (and, in the case of a Shelf Registration Statement, the Holders and their counsel) shall not have previously been advised and furnished a copy or to which the Placement Agents or their counsel (and, in the case of a Registration Statement, the Holders or their counsel) shall object; 17 16 (k) obtain a CUSIP number for all Exchange Certificates or Registrable Certificates, as the case may be, not later than the effective date of a Registration Statement; (l) cause the Trust Agreements to be qualified under the Trust Indenture Act of 1939, as amended (the "TIA") in connection with the registration of the Exchange Certificates or Registrable Certificates, as the case may be, cooperate with the Trustees and the Holders to effect such changes to the Trust Agreements as may be required for the Trust Agreements to be so qualified in accordance with the terms of the TIA and execute, and use its best efforts to cause the Trustees to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the SEC to enable the Trust Agreements to be so qualified in a timely manner; (m) in the case of a Shelf Registration, make available for inspection by a representative of the Holders of the Registrable Certificates, any Underwriter participating in any disposition pursuant to such Shelf Registration Statement, and attorneys and accountants designated by the Holders, at reasonable times and in a reasonable manner, all financial and other records, pertinent documents and properties of the Company, and cause the respective officers, directors and employees of the Company to supply all information reasonably requested by any such representative, Underwriter, attorney or accountant in connection with a Shelf Registration Statement; (n) in the case of a Shelf Registration, use its best efforts to cause all Registrable Certificates to be listed on any securities exchange or any automated quotation system on which similar securities issued by the Company are then listed if requested by the Majority Holders, to the extent such Registrable Certificates satisfy applicable listing requirements; (o) use its best efforts to cause the Exchange Certificates or Registrable Certificates, as the case may be, to be rated by two nationally recognized statistical rating organizations (as such term is defined in Rule 436(g)(2) under the 1933 Act); (p) if reasonably requested by any Holder of Registrable Certificates covered by a Registration Statement, (i) promptly incorporate in a Prospectus supplement or post-effective amendment such information with respect to such Holder as such Holder reasonably requests to be included therein and (ii) make all required filings of such Prospectus supplement or such post-effective amendment as soon as the Company has received satisfactory notification of the matters to be incorporated in such filing; and 18 17 (q) in the case of a Shelf Registration, enter into such customary agreements and take all such other actions in connection therewith (including those requested by the Holders of a majority of the class of Registrable Certificates being sold) in order to expedite or facilitate the disposition of such Registrable Certificates including, but not limited to, an Underwritten Offering and in such connection, (i) to the extent possible, make such representations and warranties to the Holders and any Underwriters of such Registrable Certificates with respect to the business of the Company and its subsidiaries, the Registration Statement, Prospectus and documents incorporated by reference or deemed incorporated by reference, if any, in each case, in form, substance and scope as are customarily made by issuers to underwriters in underwritten offerings and confirm the same if and when requested, (ii) obtain opinions of counsel to the Company (which counsel and opinions, in form, scope and substance, shall be reasonably satisfactory to the Holders and such Underwriters and their respective counsel) addressed to each selling Holder and Underwriter of Registrable Certificates, covering the matters customarily covered in opinions requested in underwritten offerings, (iii) obtain "cold comfort" letters from the independent certified public accountants of the Company (and, if necessary, any other certified public accountant of any subsidiary of the Company, or of any business acquired by the Company for which financial statements and financial data are or are required to be included in the Registration Statement) addressed to each selling Holder and Underwriter of Registrable Certificates, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings, and (iv) deliver such documents and certificates as may be reasonably requested by the Holders of a majority in principal amount of the Registrable Certificates being sold or the Underwriters, and which are customarily delivered in underwritten offerings, to evidence the continued validity of the representations and warranties of the Company made pursuant to clause (i) above and to evidence compliance with any customary conditions contained in an underwriting agreement. In the case of a Shelf Registration Statement, the Company may require each Holder of Registrable Certificates to furnish to the Company such information regarding the Holder and the proposed distribution by such Holder of such Registrable Certificates as the Company may from time to time reasonably request in writing. In the case of a Shelf Registration Statement, each Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(e)(v) hereof, such Holder will forthwith discontinue disposition of Registrable Certificates pursuant to a Shelf Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(i) hereof, and, if so directed by the Company, such Holder will deliver to the Company (at the Company's expense) all copies in its possession, other than permanent file copies then in such Holder's 19 18 possession, of the Prospectus covering such Registrable Certificates current at the time of receipt of such notice. If the Company shall give any such notice to suspend the disposition of Registrable Certificates pursuant to a Registration Statement, the Company shall extend the period during which the Registration Statement shall be maintained effective pursuant to this Registration Rights Agreement by the number of days during the period from and including the date of the giving of such notice to and including the date when the Holders shall have received copies of the supplemented or amended Prospectus necessary to resume such dispositions. The Company may give any such notice only twice during any 365 day period and any such suspensions may not exceed 30 days for each suspension and there may not be more than two suspensions in effect during any 365 day period. The Holders of Registrable Certificates covered by a Shelf Registration Statement who desire to do so may sell such Registrable Certificates in an Underwritten Offering. In any such Underwritten Offering, the investment banker or investment bankers and manager or managers (the "Underwriters") that will administer the offering will be selected by the Majority Holders of the Registrable Certificates included in such offering. 4. Participation of Broker-Dealers in Exchange Offer. (a) The Staff of the SEC has taken the position that any broker-dealer that receives Exchange Certificates for its own account in the Exchange Offer in exchange for Certificates that were acquired by such broker-dealer as a result of market making or other trading activities (a "Participating Broker-Dealer") may be deemed to be an "underwriter" within the meaning of the 1933 Act and must deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of such Exchange Certificates. The Company understands that it is the Staff's position that if the Prospectus contained in the Exchange Offer Registration Statement includes a plan of distribution containing a statement to the above effect and the means by which Participating Broker-Dealers may resell the Exchange Certificates, without naming the Participating Broker-Dealers or specifying the amount of Exchange Certificates owned by them, such Prospectus may be delivered by Participating Broker-Dealers to satisfy their prospectus delivery obligation under the 1933 Act in connection with resales of Exchange Certificates for their own accounts, so long as the Prospectus otherwise meets the requirements of the 1933 Act. (b) In light of Section 4(a) above, notwithstanding the other provisions of this Registration Rights Agreement, the Company agrees that the provisions of this Registration Rights Agreement as they relate to a Shelf Registration shall also apply to an Exchange Offer Registration to the extent, and with such reasonable modifications thereto as may be reasonably requested by the Placement Agents or by one or more Participating Broker-Dealers, in each case as provided in clause (ii) below, in order to expedite or 20 19 facilitate the disposition of any Exchange Certificates by Participating Broker-Dealers consistent with the positions of the Staff recited in Section 4(a) above; provided that: (i) the Company shall not be required to amend or supplement the Prospectus contained in the Exchange Offer Registration Statement, as would otherwise be contemplated by Section 3(i), for a period exceeding 180 days after the last Exchange Date (as such period may be extended pursuant to the penultimate paragraph of Section 3 of this Agreement) and Participating Broker-Dealers shall not be authorized by the Company to deliver and shall not deliver such Prospectus after such period in connection with the resales contemplated by this Section 4; and (ii) the application of the Shelf Registration procedures set forth in Section 3 of this Registration Rights Agreement to an Exchange Offer Registration, to the extent not required by the positions of the Staff of the SEC or the 1933 Act and the rules and regulations thereunder, will be in conformity with the reasonable request to the Company by the Placement Agents or with the reasonable request in writing to the Company by one or more broker-dealers who certify to the Placement Agents and the Company in writing that they anticipate that they will be Participating Broker-Dealers; provided that in connection with such application of the Shelf Registration procedures set forth in Section 3 to an Exchange Offer Registration, the Company shall be obligated (x) to deal only with one entity representing the Participating Broker-Dealers, which shall be Morgan Stanley unless it elects not to act as such representative, (y) to pay the fees and expenses of only one counsel representing the Participating Broker-Dealers, which shall be counsel to the Placement Agents unless such counsel elects not to so act, and (z) to cause to be delivered only one, if any, "cold comfort" letter with respect to the Prospectus in the form existing on the last Exchange Date and with respect to each subsequent amendment or supplement, if any, effected during the period specified in clause (i) above. (c) The Placement Agents shall have no liability to the Company or any Holder with respect to any request that it may make pursuant to Section 4(b) above. 5. Indemnification and Contribution. (a) The Company agrees to indemnify and hold harmless each Placement Agent, each Holder and each person, if any, who controls any Placement Agent or any Holder within the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act, or is under common control with, or is controlled by, any Placement Agent or any Holder, from and against all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred by any Placement Agent, any Holder or any such controlling or affiliated person in connection with defending or investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto) pursuant to which Exchange Certificates or Registrable 21 20 Certificates were registered under the 1933 Act, including all documents incorporated therein by reference, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or caused by any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto), or caused by any omission or alleged omission to state therein a material fact necessary to make the statements therein in light of the circumstances under which they were made not misleading, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to the Placement Agents or any Holder (and, in the case of such losses, claims, damages or liabilities incurred by Morgan Stanley, by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to Morgan Stanley Capital Services, Inc. or to Morgan Stanley, Dean Witter, Discover & Co.) furnished to the Company in writing by the Placement Agents or any selling Holder expressly for use therein, provided, however, that the foregoing indemnity agreement with respect to the Preliminary Memorandum shall not inure to the benefit of any Placement Agent from whom the person asserting any such losses, claims, damages or liabilities purchased Offered Certificates, or any person controlling such Placement Agent, if a copy of the Final Memorandum (as then amended or supplemented if the Company shall have furnished any amendments thereto) was not sent or given by or on behalf of such Placement Agent to such person, if required by law so to have been delivered, at or prior to the written confirmation of the sale of the Offered Certificates (as so amended or supplemented) would have cured the defect giving rise to such losses, claims, damages or liabilities, unless such failure is the result of noncompliance by the Company with Section 5(a) of the Placement Agreement. In connection with any Underwritten Offering permitted by Section 3, the Company will also indemnify the Underwriters, if any, selling brokers, dealers and similar securities industry professionals participating in the distribution, their officers and directors and each Person who controls such Persons (within the meaning of the 1933 Act and the 1934 Act) to the same extent as provided above with respect to the indemnification of the Holders, if requested in connection with any Registration Statement. (b) Each Holder agrees, severally and not jointly, to indemnify and hold harmless the Company, each Placement Agent, the other selling Holders and each of their respective directors, officers who sign the Registration Statement and each Person, if any, who controls the Company, any Placement Agent or any other selling Holder within the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act to the same extent as the foregoing indemnity from the Company to the Placement Agents and the Holders, but only with reference to information relating to such Holder furnished to the Company in writing by such Holder expressly for use in any Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto). 22 21 (c) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to either of paragraph (a) or paragraph (b) above, such person (the "indemnified party") shall promptly notify the person against whom such indemnity may be sought (the "indemnifying party") in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for (a) the fees and expenses of more than one separate firm (in addition to any local counsel) for the Placement Agents and all persons, if any, who control any Placement Agent within the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act, (b) the fees and expenses of more than one separate firm (in addition to any local counsel) for the Company, its directors, its officers who sign the Registration Statement and each person, if any, who controls the Company within the meaning of either such Section and (c) the fees and expenses of more than one separate firm (in addition to any local counsel) for all Holders and all persons, if any, who control any Holders within the meaning of either such Section, and that all such fees and expenses shall be reimbursed as they are incurred. In such case involving the Placement Agents and persons who control any Placement Agent, such firm shall be designated in writing by the Placement Agents. In such case involving the Holders and such persons who control Holders, such firm shall be designated in writing by the Majority Holders. In all other cases, such firm shall be designated by the Company. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent but, if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second and third sentences of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 60 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party for such fees and expenses of counsel in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect 23 22 of which such indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (d) If the indemnification provided for in paragraph (a) or paragraph (b) of this Section 4 is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect the relative fault of the indemnifying party or parties on the one hand and of the indemnified party or parties on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of the Company and the Holders shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Holders and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Holders' respective obligations to contribute pursuant to this Section 5(d) are several in proportion to the respective number of Registrable Certificates of such Holder that were registered pursuant to a Registration Statement. (e) The Company and each Holder agree that it would not be just or equitable if contribution pursuant to this Section 5 were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) above. The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 5, no Holder shall be required to indemnify or contribute any amount in excess of the amount by which the total price at which Registrable Certificates were sold by such Holder exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Section 5 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. The indemnity and contribution provisions contained in this Section 5 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of the Placement Agents, any Holder 24 23 or any person controlling any Placement Agent or any Holder, or by or on behalf of the Company, its officers or directors or any person controlling the Company, (iii) acceptance of any of the Exchange Certificates and (iv) any sale of Registrable Certificates pursuant to a Shelf Registration Statement. 6. Miscellaneous. (a) No Inconsistent Agreements. The Company has not entered into, and on or after the date of this Registration Rights Agreement will not enter into, any agreement which is inconsistent with the rights granted to the Holders of Registrable Certificates in this Registration Rights Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's other issued and outstanding securities under any such agreements. (b) Amendments and Waivers. The provisions of this Registration Rights Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Company has obtained the written consent of Holders of at least a majority in aggregate principal amount of the outstanding Registrable Certificates affected by such amendment, modification, supplement, waiver or consent; provided, however, that no amendment, modification, supplement, waiver or consents to any departure from the provisions of Section 5 hereof shall be effective as against any Holder of Registrable Certificates unless consented to in writing by such Holder. (c) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, telex, telecopier, or any courier guaranteeing overnight delivery (i) if to a Holder, at the most current address given by such Holder to the Company by means of a notice given in accordance with the provisions of this Section 6(c), which address initially is, with respect to the Placement Agents, the address set forth in the Placement Agreement, and (ii) if to the Company, initially at the Company's address set forth in the Placement Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 6(c). All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; and on the next business day if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands, or other communications shall be concurrently delivered by the person giving the same to each Trustee, at the address specified in the Applicable Trust Agreement. 25 24 (d) Successors and Assigns. This Registration Rights Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties, including, without limitation and without the need for an express assignment, subsequent Holders; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Certificates in violation of the terms of the Placement Agreement or the Trust Agreements. If any transferee of any Holder shall acquire Registrable Certificates, in any manner, whether by operation of law or otherwise, such Registrable Certificates shall be held subject to all of the terms of this Registration Rights Agreement, and by taking and holding such Registrable Certificates, such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Registration Rights Agreement and such Person shall be entitled to receive the benefits hereof. The Placement Agents (in their capacity as Placement Agents) shall have no liability or obligation to the Company with respect to any failure by any other Holder to comply with, or any breach by any other Holder of, any of the obligations of such other Holder under this Registration Rights Agreement. (e) Purchases and Sales of Certificates. The Company shall not, and shall use its best efforts to cause its affiliates (as defined in Rule 405 under the 1933 Act), not to purchase and then resell or otherwise transfer any Certificates. (f) Third Party Beneficiary. The Holders shall be third party beneficiaries to the agreements made hereunder and shall have the right to enforce such agreements directly to the extent they deem such enforcement necessary or advisable to protect their rights hereunder. (g) Counterparts. This Registration Rights Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Registration Rights Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) Governing Law. This Registration Rights Agreement shall be governed by and construed in accordance with the internal laws of the State of New York. (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. 26 25 (k) Trustees. The Trustees shall take such action as may be reasonably requested by the Company in connection with the Company satisfying its obligations arising under this Agreement. 27 IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above. ATLAS AIR, INC. By: /s/ RICHARD H. SHUYLER -------------------------------- Name: Richard H. Shuyler Title: Chief Financial Officer, Sr. Vice Pres., Finance; and Confirmed and accepted as of the date first above written: MORGAN STANLEY & CO. INCORPORATED BT ALEX. BROWN INCORPORATED DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION GOLDMAN, SACHS & CO. By: MORGAN STANLEY & CO. INCORPORATED By: /s/ TOM CAHILL ------------------------------------------ Name: Title: EX-10.90 4 PASS THROUGH TRUST AGREEMENT 1998-1A-O 1 EXHIBIT 10.90 EXECUTION COPY - -------------------------------------------------------------------------------- PASS THROUGH TRUST AGREEMENT Dated as of February 9, 1998 between ATLAS AIR, INC. and WILMINGTON TRUST COMPANY as Trustee $300,254,000 Atlas Air Pass Through Trust 1998-1A-O 7.38% Atlas Air 1998-1A-O Initial Pass Through Certificates 7.38% Atlas Air 1998-1A-O Exchange Pass Through Certificates - -------------------------------------------------------------------------------- 2 Reconciliation and tie between Atlas Air Pass Through Trust Agreement, dated as of February 9, 1998 and the Trust Indenture Act of 1939. This reconciliation does not constitute part of the Pass Through Trust Agreement.
Trust Indenture Act Pass Through Trust of 1939 Section Agreement Section -------------------------- ---------------------- 310(a)(1) 7.07 (a)(2) 7.07 312(a) 3.05; 8.01; 8.02 313(a) 7.07 314(a) 8.04(a) - (c) (a)(4) 8.04(d) (c)(1) 1.02 (c)(2) 1.02 (d)(1) 7.13; 11.01 (d)(2) 7.13; 11.01 (d)(3) 2.01 (e) 1.02 315(b) 7.02 316(a)(last sentence) 1.01(c) (a)(1)(A) 6.04 (a)(1)(B) 6.05 (b) 6.06 (c) 1.04(d) 317(a)(1) 6.03 (b) 7.13 318(a) 12.05
ii 3 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 1.02. Compliance Certificates and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 1.03. Form of Documents Delivered to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 1.04. Directions of Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE II ORIGINAL ISSUANCE OF CERTIFICATES: ACQUISITION OF TRUST PROPERTY Section 2.01. Delivery of Documents; Delivery Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 2.02. Withdrawal of Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 2.03. Acceptance by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 2.04. Limitation of Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 ARTICLE III THE CERTIFICATES Section 3.01. Title, Form, Denomination and Execution of Certificates . . . . . . . . . . . . . . . . . . . . . 20 Section 3.02. Restrictive Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 3.03. Authentication of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 3.04. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 3.05. Book-Entry Provisions for U.S. Global Certificate and Offshore Global Certificates . . . . . . . . 25 Section 3.06. Special Transfer Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Section 3.07. Mutilated, Destroyed, Lost or Stolen Certificates . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 3.08. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 3.09. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 3.10. Temporary Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 3.11. Limitation of Liability for Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
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Page ---- ARTICLE IV DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS Section 4.01. Certificate Account and Special Payments Account . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 4.02. Distributions from Certificate Account and Special Payments Account . . . . . . . . . . . . . . . 32 Section 4.03. Statements to Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Section 4.04. Investment of Special Payment Moneys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 ARTICLE V THE COMPANY Section 5.01. Maintenance of Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Section 5.02. Consolidation, Merger, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 ARTICLE VI DEFAULT Section 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 6.02. Incidents of Sale of Equipment Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Section 6.03. Judicial Proceedings Instituted by Trustee; Trustee May Bring Suit . . . . . . . . . . . . . . . . 40 Section 6.04. Control by Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Section 6.05. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Section 6.06. Right of Certificateholders to Receive Payments Not to Be Impaired . . . . . . . . . . . . . . . . 42 Section 6.07. Certificateholders May Not Bring Suit Except Under Certain Conditions . . . . . . . . . . . . . . 42 Section 6.08. Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Section 6.09. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 ARTICLE VII THE TRUSTEE Section 7.01. Certain Duties and Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Section 7.02. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Section 7.03. Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Section 7.04. Not Responsible for Recitals or Issuance of Certificates . . . . . . . . . . . . . . . . . . . . . 45 Section 7.05. May Hold Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 7.06. Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 7.07. Compensation and Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
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Page ---- Section 7.08. Corporate Trustee Required; Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Section 7.09. Resignation and Removal; Appointment of Successor . . . . . . . . . . . . . . . . . . . . . . . . 47 Section 7.10. Acceptance of Appointment by Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Section 7.11. Merger, Conversion, Consolidation or Succession to Business . . . . . . . . . . . . . . . . . . . 49 Section 7.12. Maintenance of Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Section 7.13. Money for Certificate Payments to Be Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . 51 Section 7.14. Registration of Equipment Notes in Trustee's Name . . . . . . . . . . . . . . . . . . . . . . . . 51 Section 7.15. Representations and Warranties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Section 7.16. Withholding Taxes; Information Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Section 7.17. Trustee's Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Section 7.18. Preferential Collection of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 ARTICLE VIII CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE Section 8.01. The Company to Furnish Trustee with Names and Addresses of Certificateholders . . . . . . . . . . 54 Section 8.02. Preservation of Information; Communications to Certificateholders . . . . . . . . . . . . . . . . 54 Section 8.03. Reports by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Section 8.04. Reports by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 ARTICLE IX SUPPLEMENTAL AGREEMENTS Section 9.01. Supplemental Agreements Without Consent of Certificateholders . . . . . . . . . . . . . . . . . . 55 Section 9.02. Supplemental Agreements with Consent of Certificateholders . . . . . . . . . . . . . . . . . . . . 57 Section 9.03. Documents Affecting Immunity or Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 9.04. Execution of Supplemental Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 9.05. Effect of Supplemental Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 9.06. Conformity with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Section 9.07. Reference in Certificates to Supplemental Agreements . . . . . . . . . . . . . . . . . . . . . . . 59 ARTICLE X AMENDMENTS TO INDENTURE AND NOTE DOCUMENTS Section 10.01. Amendments and Supplements to Indenture and Other Note Documents . . . . . . . . . . . . . . . . 59
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Page ---- ARTICLE XI TERMINATION OF TRUSTS Section 11.01. Termination of the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 ARTICLE XII MISCELLANEOUS PROVISIONS Section 12.01. Limitation on Rights of Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Section 12.02. Liabilities of Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Section 12.03. Registration of Equipment Notes in Name of Subordination Agent . . . . . . . . . . . . . . . . . 63 Section 12.04. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Section 12.05. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Section 12.06. Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Section 12.07. Trust Indenture Act Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.08. Effect of Headings and Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.09. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.10. Benefits of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.11. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.12. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.13. Communication by Certificateholders with Other Certificateholders . . . . . . . . . . . . . . . . 65 Section 12.14. Intention of Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Exhibit A - Form of Certificate Exhibit B - Form of Certificate for Unlegended Certificates Exhibit C - Form of Certificate To Be Delivered in Connection with Transfers Pursuant to Regulation S Exhibit D - Form of Certificate To Be Delivered in Connection with Transfers to Non-QIB Accredited Investors Exhibit E - Form of Assignment and Assumption Agreement vi 7 PASS THROUGH TRUST AGREEMENT This PASS THROUGH TRUST AGREEMENT, dated as of February 9, 1998 (as the same may be amended, supplemented or modified from time to time, this "Agreement"), between ATLAS AIR, INC., a Delaware corporation (the "Company"), and WILMINGTON TRUST COMPANY, a Delaware trust company, as Trustee, is made with respect to the formation of Atlas Air Pass Through Trust 1998-1A-O and the issuance of 7.38% Atlas Air 1998-1A-O Initial Pass Through Certificates representing fractional undivided interests in the Trust. W I T N E S S E T H: WHEREAS, the Company has obtained commitments from Boeing (such term and certain other capitalized terms used herein are defined below) for the delivery of certain Aircraft; WHEREAS, the Company intends to finance the acquisition of each such Aircraft either (i) through separate leveraged lease transactions, in which case the Company will lease such Aircraft (collectively, the "Leased Aircraft") or (ii) through separate secured loan transactions, in which case the Company will own such Aircraft (collectively, the "Owned Aircraft"); WHEREAS, in the case of each Leased Aircraft, each Owner Trustee, acting on behalf of the corresponding Owner Participant, will issue pursuant to an Indenture, on a non-recourse basis, Equipment Notes in order to finance a portion of its purchase price of such Leased Aircraft; WHEREAS, in the case of each Owned Aircraft, the Company will issue pursuant to an Indenture, on a recourse basis, Equipment Notes to finance a portion of the purchase price of such Owned Aircraft; WHEREAS, the Trustee hereby declares the creation of this Atlas Air Pass Through Trust 1998-1A (the "Trust") for the benefit of the Certificateholders, and the initial Certificateholders as the grantors of the Trust, by their respective acceptances of the Certificates, join in the creation of the Trust with the Trustee; WHEREAS, all Certificates to be issued by the Trust will evidence fractional undivided interests in the Trust and will convey no rights, benefits or interests in respect of any property other than the Trust Property except for those Certificates to which an Escrow Receipt has been affixed; WHEREAS, the Escrow Agent and the Placement Agents have contemporaneously herewith entered into an Escrow Agreement with the Escrow Paying Agent pursuant to which the Placement Agents have delivered to the Escrow Agent the 8 2 proceeds from the sale of the Certificates and have irrevocably instructed the Escrow Paying Agent to withdraw and pay funds from such proceeds upon request and proper certification by the Trustee to purchase Equipment Notes as the Aircraft are delivered by Boeing under the Aircraft Purchase Agreement from time to time prior to the Delivery Period Termination Date; WHEREAS, the Escrow Agent on behalf of the Certificateholders has contemporaneously herewith entered into a Deposit Agreement with the Depositary under which the Deposits referred to therein will be made and from which it will withdraw funds to allow the Trustee to purchase Equipment Notes from time to time prior to the Delivery Period Termination Date; WHEREAS, pursuant to the terms and conditions of this Agreement and the Note Purchase Agreement, upon or shortly following delivery of an Aircraft, the Trustee on behalf of the Trust, using funds withdrawn under the Escrow Agreement, shall purchase one or more Equipment Notes having the same interest rate as, and final maturity date not later than the final Regular Distribution Date of, the Certificates issued hereunder and shall hold such Equipment Notes in trust for the benefit of the Certificateholders; WHEREAS, to facilitate the sale of Equipment Notes to, and the purchase of Equipment Notes by, the Trustee on behalf of the Trust, the Company has duly authorized the execution and delivery of this Agreement as the "issuer", as such term is defined in and solely for purposes of the Securities Act, of the Certificates to be issued pursuant hereto and as the "obligor", as such term is defined in and solely for purposes of the Trust Indenture Act of 1939, as amended, with respect to all such Certificates and is undertaking to perform certain administrative and ministerial duties hereunder and is also undertaking to pay the ongoing fees and expenses of the Trustee; WHEREAS, all of the conditions and requirements necessary to make this Agreement, when duly executed and delivered, a valid, binding and legal instrument in accordance with its terms and for the purposes herein expressed, have been done, performed and fulfilled, and the execution and delivery of this Agreement in the form and with the terms hereof have been in all respects duly authorized; WHEREAS, upon issuance of the Exchange Certificates, if any, or the effectiveness of the Shelf Registration Statement, this Agreement as amended or supplemented from time to time, will be subject to the provisions of the Trust Indenture Act of 1939, as amended, and shall, to the extent applicable, be governed by such provisions; NOW, THEREFORE, in consideration of the mutual agreements herein contained, and of other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 9 3 ARTICLE I DEFINITIONS Section 1.01. Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms used herein that are defined in this Article I have the meanings assigned to them in this Article I, and include the plural as well as the singular; (b) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, or by the rules promulgated under the Trust Indenture Act, have the meanings assigned to them therein; (c) all references in this Agreement to designated "Articles", "Sections", "Subsections" and other subdivisions are to the designated Articles, Sections, Subsections and other subdivisions of this Agreement; (d) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section, Subsection or other subdivision; and (e) unless the context otherwise requires, whenever the words "including" "include" or "includes" are used herein, it shall be deemed to be followed by the phrase "without limitation". "Act" has the meaning, with respect to any Certificateholder, specified in Section 1.04(a). "Affiliate" means, with respect to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person. For the purposes of this definition, "control", when used with respect to any specified Person, means the power, directly or indirectly, to direct the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agent Members" has the meaning specified in Section 3.05(a). "Agreement" has the meaning specified in the recitals hereto. 10 4 "Aircraft" means each of the Aircraft or Substitute Aircraft in respect of which a Participation Agreement is entered into in accordance with the Note Purchase Agreement. "Applicable Delivery Date" has the meaning specified in Section 2.01(b). "Applicable Participation Agreement" has the meaning specified in Section 2.01(b). "Assignment and Assumption Agreement" means the assignment and assumption agreement substantially in the form of Exhibit E hereto executed and delivered in accordance with Section 11.01. "Authorized Agent" means, with respect to the Certificates, any Paying Agent or Registrar for the Certificates. "Avoidable Tax" has the meaning set forth in Section 7.09(e). "Boeing" means The Boeing Company. "Business Day" means, with respect to the Certificates, any day other than a Saturday, a Sunday or a day on which commercial banks are required or authorized to close in Denver, Colorado, New York, New York, Chicago, Illinois or, so long as any Certificate is outstanding, the city and state in which the Trustee or any related Loan Trustee maintains its Corporate Trust Office or receives and disburses funds. "Certificate" means any one of the Initial Certificates or Exchange Certificates and any such Certificates issued in exchange therefor or replacement thereof pursuant to this Agreement. "Certificate Account" means, with respect to the Certificates, the account or accounts created and maintained for such series pursuant to Section 4.01(a). "Certificateholder" or "Holder" means the Person in whose name a Certificate is registered in the Register for Certificates. "Clearing Agency" means an organization registered as a "clearing agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as amended. "Clearing Agency Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects, 11 5 directly or indirectly, book-entry transfers and pledges of securities deposited with the Clearing Agency. "Company" means Atlas Air, Inc., a Delaware corporation, or its successor in interest pursuant to Section 5.02, or (only in the context of provisions hereof, if any, when such reference is required for purposes of compliance with the Trust Indenture Act) any other "obligor" (within the meaning of the Trust Indenture Act) with respect to the Certificates. "Controlling Party" means the Person entitled to act as such pursuant to the terms of the Intercreditor Agreement. "Corporate Trust Office" means, with respect to the Trustee or any Loan Trustee, the office of such trustee in the city at which at any particular time its corporate trust business shall be principally administered. "Cut-off Date" means the earlier of (a) the Delivery Period Termination Date and (b) the date on which a Triggering Event occurs. "Delivery Period Termination Date" means June 30, 1999; provided, that if a labor strike or work stoppage occurs at The Boeing Company prior to such date, such date shall be extended by adding thereto the number of days that each such labor strike or work stoppage continues in effect. "Direction" has the meaning specified in Section 1.04(a). "Equipment Notes" means all of the equipment notes issued under the Indentures. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor federal statute. "Escrow Account" has the meaning specified in Section 2.02(b). "Escrow Agent" means, initially, First Security, National Association, and any replacement or successor therefor appointed in accordance with the Escrow Agreement. "Escrow Agreement" means the Escrow and Paying Agent Agreement dated as of February 9, 1998 relating to the Certificates, among the Escrow Agent, the Escrow Paying Agent, the Trustee and Placement Agents, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. 12 6 "Escrow Paying Agent" means the Person acting as paying agent under the Escrow Agreement. "Escrow Receipt" means the receipt substantially in the form annexed to the Escrow Agreement representing a fractional undivided interest in the funds held in escrow thereunder. "Escrowed Funds" has the meaning specified in Section 2.02(b). "Event of Default" means an Indenture Event of Default under any Indenture pursuant to which Equipment Notes held by such Trust were issued. "Exchange Certificates" means the certificates substantially in the form of Exhibit A hereto issued in exchange for the Certificates pursuant to the Registration Rights Agreement and authenticated hereunder. "Final Withdrawal Notice" has the meaning specified in Section 2.02. "Fractional Undivided Interest" means the fractional undivided interest in a Trust that is evidenced by a Certificate. "Global Certificates" has the meaning specified in Section 3.01(d). "Indenture" means each of the separate trust indentures and mortgages relating to the Aircraft, each as specified or described in a Delivery Notice delivered pursuant to the Note Purchase Agreement or the related Participation Agreement, in each case as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Indenture Event of Default" means, with respect to any Indenture, any Indenture Event of Default (as such term is defined in such Indenture). "Initial Regular Distribution Date" means, with respect to the Certificates, the first Regular Distribution Date on which a Scheduled Payment is to be made. "Institutional Accredited Investor" means an institutional investor that is an "accredited investor" within the meaning set forth in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act. "Intercreditor Agreement" means the Intercreditor Agreement dated as of February 9, 1998 among the Trustee, the Other Trustees, the Liquidity Providers, the liquidity providers relating to the Certificates issued under (and as defined in) each of 13 7 the Other Pass Through Trust Agreements, and Wilmington Trust Company, as Subordination Agent and as trustee thereunder, as amended, supplemented or otherwise modified from time to time in accordance with its terms. "Issuance Date" means, with respect to the Certificates, the date of the issuance of such Certificates. "Investors" means the Placement Agents together with all subsequent beneficial owners of the Certificates. "Lease" means, with respect to each Leased Aircraft, any lease between an Owner Trustee, as the lessor, and the Company, as the lessee, referred to in the related Indenture, as such lease may be amended, supplemented or otherwise modified in accordance with its terms; and "Leases" means all such Leases. "Leased Aircraft" has the meaning specified in the recitals hereto. "Leased Aircraft Participation Agreement" means any participation agreement substantially in the form of Exhibit A-1 to the Note Purchase Agreement, as the same may be amended, supplemented or otherwise modified in accordance with its terms. "Letter of Representations" means, with respect to the Certificates, an agreement among the Company, the Trustee and the initial Clearing Agency. "Liquidity Facility" means, with respect to the Certificates, any revolving credit agreement, letter of credit or similar facility relating to the Certificates between a bank or other financial institution and a Subordination Agent, as amended, replaced, supplemented or otherwise modified from time to time in accordance with its terms and the terms of any Intercreditor Agreement. "Liquidity Provider" means, with respect to the Certificates, a bank or other financial institution that agrees to provide a Liquidity Facility for the benefit of the holders of Certificates. "Loan Trustee" means, with respect to any Equipment Note or the Indenture applicable thereto, the bank or trust company designated as loan or indenture trustee under such Indenture, and any successor to such Loan Trustee as such trustee; and "Loan Trustees" means all of the Loan Trustees under the Indentures. "Non-U.S. Person" means a Person that is not a "U.S. person", as defined in Regulation S. 14 8 "Note Documents" means, with respect to the Certificates, the Equipment Notes with respect to such Certificates and, with respect to such Equipment Notes, the related Indenture, Note Purchase Agreement and, if the related Aircraft is leased to the Company, the related Lease and the related Owner Trustee's Purchase Agreement. "Note Purchase Agreement" means, with respect to the Certificates, any note purchase, refunding, participation or similar agreement providing for, among other things, the purchase of Equipment Notes by the Trustee on behalf of the relevant Trust; and "Note Purchase Agreements" means all such agreements. "Offering Memorandum" means the Offering Memorandum dated January 27, 1998 relating to the offering of the Certificates and the certificates offered under the Other Pass Through Trust Agreements. "Officer's Certificate" means a certificate signed, (a) in the case of the Company, by the Chairman or Vice Chairman of the Board of Directors, the President, any Vice President or the Treasurer of the Company, signing alone, or (b) in the case of the Trustee or an Owner Trustee or a Loan Trustee, a Responsible Officer of the Trustee or such Owner Trustee or such Loan Trustee, as the case may be. "Offshore Certificates Exchange Date" has the meaning specified in Section 3.01(d). "Offshore Global Certificates" has the meaning specified in Section 3.01(d). "Offshore Physical Certificates" has the meaning specified in Section 3.01(e). "Opinion of Counsel" means a written opinion of legal counsel who (a) in the case of counsel for the Company may be (i) a senior attorney of the Company one of whose principal duties is furnishing advice as to legal matters, (ii) Cahill Gordon & Reindel or (iii) such other counsel designated by the Company and reasonably acceptable to the Trustee and (b) in the case of any Owner Trustee or any Loan Trustee, may be such counsel as may be designated by any of them whether or not such counsel is an employee of any of them, and who shall be reasonably acceptable to the Trustee. "Other Pass Through Trust Agreements" means each of the two other Atlas Air 1998-1 Pass Through Trust Agreements relating to Atlas Air Pass Through Trust, Series 1998-1B-O and Atlas Air Pass Through Trust, Series 1998-1C-O, dated the date hereof. 15 9 "Other Trustees" means the trustees under the Other Pass Through Trust Agreements, and any successor or other trustee appointed as provided therein. "Other Trusts" means the Atlas Air Pass Through Trust 1998-1B-O and the Atlas Air Pass Through Trust 1998-1C-O, each created on the date hereof. "Outstanding" when used with respect to Certificates, means, as of the date of determination, all Certificates theretofore authenticated and delivered under this Agreement, except: (a) Certificates theretofore cancelled by the Registrar or delivered to the Trustee or the Registrar for cancellation; (b) All of the Certificates if money in the full amount required to make the final distribution with respect to such series pursuant to Section 11.01 hereof has been theretofore deposited with the Trustee in trust for the Holders of the Certificates as provided in Section 4.01 pending distribution of such money to such Certificateholders pursuant to payment of such final distribution payment; and (c) Certificates in exchange for or in lieu of which other Certificates have been authenticated and delivered pursuant to this Agreement. "Owned Aircraft" has the meaning specified in the recitals hereto. "Owned Aircraft Participation Agreement" means any participation agreement substantially in the form of Exhibit C-1 to the Note Purchase Agreement, as the same may be amended, supplemented or otherwise modified in accordance with its terms. "Owner Trustee's Purchase Agreement" has the meaning, with respect to the Certificates if the related Aircraft is leased to the Company, specified therefor in the related Lease. "Participation Agreement" means, collectively, the Leased Aircraft Participation Agreement and the Owned Aircraft Participation Agreement. "Paying Agent" means, with respect to the Certificates, the paying agent maintained and appointed for the Certificates pursuant to Section 7.12. "Permanent Offshore Global Certificates" has the meaning specified in Section 3.01(d). 16 10 "Permitted Investments" means obligations of the United States of America or agencies or instrumentalities thereof for the payment of which the full faith and credit of the United States of America is pledged, maturing in not more than 60 days after the date of acquisition thereof or such lesser time as is required for the distribution of any Special Payments on a Special Distribution Date. "Person" means any person, including any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, trustee, unincorporated organization, or government or any agency or political subdivision thereof. "Physical Certificates" has the meaning specified in Section 3.01. "Placement Agents" means Morgan Stanley & Co. Incorporated, BT Alex. Brown Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co. "Placement Agreement" means the Placement Agreement dated January 27, 1998 among the Placement Agents and the Company, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Pool Balance" means, as of any date, (i) the original aggregate face amount of the Certificates less (ii) the aggregate amount of all payments made in respect of the Certificates other than payments made in respect of interest or premium thereon or reimbursement of any costs or expenses incurred in connection therewith. The Pool Balance as of any Distribution Date shall be computed after giving effect to the payment of principal, if any, on the Equipment Notes or other Trust Property held in the Trust and the distribution thereof to be made on such Distribution Date. "Pool Factor" means, as of any date, the quotient (rounded to the seventh decimal place) computed by dividing (i) the Pool Balance of such series as at such date by (ii) the original aggregate face amount of the Certificates. The Pool Factor as of any Distribution Date shall be computed after giving effect to the payment of principal, if any, on the Equipment Notes or other Trust Property held in the Trust and the distribution thereof to be made on such Distribution Date. "Potential Purchaser" has the meaning, with respect to any Certificateholder, specified in Section 6.01(b). "Private Placement Legend" has the meaning specified in Section 3.02(a). 17 11 "PTC Event of Default" means, with respect to the Certificates, any failure to pay within ten Business Days of the due date thereof: (i) the outstanding Pool Balance of such series of Certificates on the date specified in any Trust Supplement for such payment or (ii) interest due on the Certificates on any Distribution Date (unless the related Subordination Agent shall have made an Interest Drawing or Drawings (as defined in the related Intercreditor Agreement), or a withdrawal or withdrawals pursuant to a cash collateral account under such Intercreditor Agreement, with respect thereto in an aggregate amount sufficient to pay such interest and shall have distributed such amount to the Trustee). "Purchasing Certificateholder" has the meaning, with respect to any Certificateholder, specified in Section 6.01(b). "QIB" means a qualified institutional buyer as defined in Rule 144A. "Record Date" means, with respect to any Trust or the related series of Certificates, (i) for Scheduled Payments to be distributed on any Regular Distribution Date, other than the final distribution with respect to such series, the 15th day (whether or not a Business Day) preceding such Regular Distribution Date, and (ii) for Special Payments to be distributed on any Special Distribution Date, other than the final distribution with respect to such series, the 15th day (whether or not a Business Day) preceding such Special Distribution Date. "Register" and "Registrar" means, each with respect to the Certificates, the register maintained and the registrar appointed pursuant to Sections 3.04 and 7.12. "Registration Event" has the meaning set forth in the Placement Agreement. "Registration Rights Agreement" means the Registration Rights Agreement dated February 9, 1998, among the Placement Agents, the Trustee, the Other Trustees and the Company, as amended, supplemented or otherwise modified from time to time in accordance with its terms. "Registration Statement" means the Registration Statement defined in the Registration Rights Agreement. "Regular Distribution Date" means, with respect to distributions of Scheduled Payments in respect of any series of Certificates, each date designated as such in this Agreement, until payment of all the Scheduled Payments to be made under the Equipment Notes held in the Trust have been made. 18 12 "Regulation S" means Regulation S under the Securities Act or any successor regulation thereto. "Related Pass Through Trust Agreement" means the Atlas Air 1998-1A-S Pass Through Trust Agreement relating to the Atlas Air Pass Through Trust 1998-1A-S and entered into by the Company and the Trustee, which agreement becomes effective upon the execution and delivery of the Assignment and Assumption Agreement pursuant to Section 11.01. "Related Trust" means the Atlas Pass Through Trust 1998-1A-S, to be formed under the Related Pass Through Trust Agreement. "Related Trustee" means the trustee under the Related Pass Through Trust Agreement. "Request" means a request by the Company setting forth the subject matter of the request accompanied by an Officer's Certificate and an Opinion of Counsel as provided in Section 1.02 of this Agreement. "Responsible Officer" means, with respect to any Trustee, any Loan Trustee and any Owner Trustee, any officer in the Corporate Trust Department of the Trustee, Loan Trustee or Owner Trustee or any other officer customarily performing functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of his knowledge of and familiarity with a particular subject. "Responsible Party" means, with respect to the Certificates, the person designated as such in the related Trust Supplement. "Rule 144A" means Rule 144A under the Securities Act and any successor rule thereto. "Scheduled Payment" means, with respect to any Equipment Note, (i) any payment of principal or interest on such Equipment Note (other than any such payment which is not in fact received by the Trustee or any Subordination Agent within five days of the date on which such payment is scheduled to be made) or (ii) any payment of interest on the Certificates with funds drawn under the Liquidity Facility for such series, which payment represents the installment of principal on such Equipment Note at the stated maturity of such installment, the payment of regularly scheduled interest accrued on the unpaid principal amount of such Equipment Note, or both; provided, however, that any payment of principal, premium, if any, or interest 19 13 resulting from the redemption or purchase of any Equipment Note shall not constitute a Scheduled Payment. "SEC" means the Securities and Exchange Commission, as from time to time constituted or created under the Securities Exchange Act of 1934, as amended, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties on such date. "Selling Certificateholder" has the meaning, with respect to any Certificateholder, specified in Section 6.01(b). "Shelf Registration Statement" has the meaning set forth in the Registration Rights Agreement. "Special Distribution Date" means, with respect to the Certificates, each date on which a Special Payment is to be distributed as specified in this Agreement. "Special Payment" means (i) any payment (other than a Scheduled Payment) in respect of, or any proceeds of, any Equipment Note or Trust Indenture Estate (as defined in each Indenture) or Special Redemption Premium, (ii) the amounts required to be distributed pursuant to the last paragraph of Section 2.02(b) or (iii) the amounts required to be distributed pursuant to the penultimate paragraph of Section 2.02(b). "Special Payments Account" means, with respect to the Certificates, the account or accounts created and maintained for such series pursuant to Section 4.01(b) and the related Trust Supplement. "Special Redemption Premium" means the premium payable by the Company in respect of the Final Withdrawal pursuant to the Note Purchase Agreement. "Specified Investments" means, with respect to any Trust, (i) obligations of, or guaranteed by, the United States Government or agencies thereof, (ii) open market commercial paper of any corporation incorporated under the laws of the United States of America or any state thereof rated at least P-2 or its equivalent by Moody's Investors Service, Inc. or at least A-2 or its equivalent by Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., (iii) certificates of deposit issued by commercial banks organized under the laws of the United States or of any political subdivision thereof having a combined capital and surplus in excess of $100,000,000 which banks or their holding companies have a rating of A or its equivalent by Moody's Investors Service, Inc. or Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc.; provided, however, that the 20 14 aggregate amount at any one time so invested in certificates of deposit issued by any one bank shall not exceed 5% of such bank's capital and surplus, (iv) U.S. dollar-denominated offshore certificates of deposit issued by, or offshore time deposits with, any commercial bank described in clause (iii) above or any subsidiary thereof and (v) repurchase agreements with any financial institution having combined capital and surplus of at least $100,000,000 with any of the obligations described in clauses (i) through (iv) above as collateral; provided furtherthat if all of the above investments are unavailable, the entire amounts to be invested may be used to purchase federal funds from an entity described in clause (iii) above. "Subordination Agent" has the meaning specified therefor in the Intercreditor Agreement. "Substitute Aircraft" has the meaning specified in the Note Purchase Agreement. "Temporary Offshore Global Certificates" has the meaning specified in Section 3.01(d). "Transfer Date" has the meaning specified in Section 11.01. "Triggering Event" has the meaning specified therefor in the Intercreditor Agreement. "Trust" means the trust under this Agreement. "Trustee" means Wilmington Trust Company, or its successor in interest, and any successor or other trustee appointed as provided herein. "Trustee's Liens" has the meaning specified in Section 7.17. "Trust Indenture Act", except as otherwise provided in Section 9.06, means, with respect to any particular Trust, the United States Trust Indenture Act of 1939, as in force at the date as of which the related Trust Supplement was executed. "Trust Property" means (i) subject to the Intercreditor Agreement, the Equipment Notes held as the property of the Trust, all monies at any time paid thereon and all monies due and to become due thereunder, (ii) funds from time to time deposited in the Escrow Account, the Certificate Account and the Special Payments Account and, subject to the Intercreditor Agreement, any proceeds from the sale by the Trustee pursuant to Article VI hereof of any such Equipment Note, (iii) all rights of the Trust and the Trustee, on behalf of the Trust, under the Intercreditor 21 15 Agreement, the Escrow Agreement, the Note Purchase Agreement and the Liquidity Facilities, including, without limitation, all rights to receive certain payments thereunder, and all monies paid to the Trustee on behalf of the Trust pursuant to the Intercreditor Agreement or the Liquidity Facilities, provided that rights with respect to the Deposits or under the Escrow Agreement, except for the right to direct withdrawals for the purchase of Equipment Notes to be held herein, will not constitute Trust Property. "U.S. Global Certificate" has the meaning specified in Section 3.01(c). "U.S. Physical Certificates" has the meaning specified in Section 3.01(e). "7.38 % 1998-1A Initial Pass Through Certificates" has the meaning specified in Section 3.01(a). "7.38% 1998-1A Exchange Pass Through Certificates" has the meaning specified in Section 3.01(a). Section 1.02. Compliance Certificates and Opinions. Upon any application or request by the Company, any Owner Trustee or any Loan Trustee to the Trustee to take any action under any provision of this Agreement, the Company, such Owner Trustee or such Loan Trustee, as the case may be, shall furnish to the Trustee (i) an Officer's Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Agreement relating to the proposed action have been complied with and (ii) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Agreement relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Agreement (other than a certificate provided pursuant to Section 8.04(d)) shall include: (a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions in this Agreement relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; 22 16 (c) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. Section 1.03. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters and any such Person may certify or give an opinion as to such matters in one or several documents. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Agreement, they may, but need not, be consolidated and form one instrument. Section 1.04. Directions of Certificateholders. (a) Any direction, consent, request, demand, authorization, notice, waiver or other action provided by this Agreement in respect of the Certificates to be given or taken by Certificateholders (a "Direction") may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Certificateholders in person or by an agent or proxy duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, when it is hereby expressly required pursuant to this Agreement, to the Company or any Loan Trustee. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Certificateholders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent or proxy shall be sufficient for any purpose of this Trust Agreement and conclusive in favor of the Trustee, the Company and the related Loan Trustee, if made in the manner provided in this Section 1.04. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the certificate of any notary public or other officer of any jurisdiction authorized to take acknowledgments of deeds or administer oaths that the Person executing such instrument acknowledged to him the execution thereof, or by an affidavit of a witness to such execution sworn to before any such notary or such other officer, and where such execution is by an officer of a corporation or association or a member of a partnership, on behalf of such corporation, association or partnership, such 23 17 certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other reasonable manner which the Trustee deems sufficient. (c) In determining whether the Certificateholders of the requisite Fractional Undivided Interests of Certificates Outstanding have given any Direction under this Agreement, Certificates owned by the Company or any Affiliate thereof shall be disregarded and deemed not to be Outstanding for purposes of any such determination. In determining whether the Trustee shall be protected in relying upon any such Direction, only Certificates which the Trustee knows to be so owned shall be so disregarded. Notwithstanding the foregoing, (i) if any such Person owns 100% of the Certificates Outstanding, such Certificates shall not be so disregarded, and (ii) if any amount of Certificates so owned by any such Person have been pledged in good faith, such Certificates shall not be disregarded if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Certificates and that the pledgee is not the Company or any Affiliate thereof. (d) The Company may, at its option, by delivery of an Officer's Certificate to the Trustee, set a record date to determine the Certificateholders in respect of the Certificates, entitled to give any Direction. Notwithstanding Section 316(c) of the Trust Indenture Act, such record date shall be the record date specified in such Officer's Certificate, which shall be a date not more than 30 days prior to the first solicitation of Certificateholders of the applicable series in connection therewith. If such a record date is fixed, such Direction may be given before or after such record date, but only the Certificateholders of record of the applicable series at the close of business on such record date shall be deemed to be Certificateholders for the purposes of determining whether Certificateholders of the requisite proportion of Outstanding Certificates have authorized or agreed or consented to such Direction, and for that purpose the Outstanding Certificates shall be computed as of such record date; provided, however, that no such Direction by the Certificateholders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Agreement not later than one year after such record date. (e) Any Direction by the Holder of any Certificate shall bind the Holder of every Certificate issued upon the transfer thereof or in exchange therefor or in lieu thereof, whether or not notation of such Direction is made upon such Certificate. (f) Except as otherwise provided in Section 1.04(c), Certificates owned by or pledged to any Person shall have an equal and proportionate benefit under the provisions of this Agreement, without preference, priority or distinction as among all of the Certificates. 24 18 ARTICLE II ORIGINAL ISSUANCE OF CERTIFICATES: ACQUISITION OF TRUST PROPERTY Section 2.01. Delivery of Documents; Delivery Dates. (a) The Trustee is hereby directed (i) to execute and deliver the Intercreditor Agreement, the Escrow Agreement and the Note Purchase Agreement on or prior to the Issuance Date, each in the form delivered to the Trustee by the Company and (ii) subject to the respective terms thereof, to perform its obligations thereunder. Upon request of the Company and the satisfaction or waiver of the closing conditions specified in the Placement Agreement, the Trustee shall execute, deliver, authenticate, issue and sell Certificates in authorized denominations equaling in the aggregate the amount set forth, with respect to the Trust, in Schedule II to the Placement Agreement evidencing the entire ownership interest in the Trust, which amount equals the maximum aggregate principal amount of Equipment Notes which may be purchased by the Trustee pursuant to the Note Purchase Agreement. Except as provided in Sections 3.04 and 3.07 of this Agreement, the Trustee shall not execute, authenticate or deliver Certificates in excess of the aggregate amount specified in this paragraph. (b) On or after the Issuance Date, the Company may deliver from time to time to the Trustee a Delivery Notice relating to one or more Equipment Notes. After receipt of a Delivery Notice and in any case no later than one Business Day prior to a Delivery Date as to which such Delivery Notice relates (the "Applicable Delivery Date"), the Trustee shall (as and when specified in the Delivery Notice) instruct the Escrow Agent to provide a Notice of Purchase Withdrawal to the Depositary requesting (A) the withdrawal of one or more Deposits on the Applicable Delivery Date in accordance with and to the extent permitted by the terms of the Escrow Agreement and the Deposit Agreement and (B) the payment of all, or a portion, of such Deposit or Deposits in an amount equal in the aggregate to the purchase price of such Equipment Notes to or on behalf of the Owner Trustee or the Company, as the case may be, issuing such Equipment Notes, all as shall be described in the Delivery Notice. The Trustee shall (as and when specified in such Delivery Notice), subject to the conditions set forth in Section 2 of the Note Purchase Agreement, enter into and perform its obligations under the Participation Agreement specified in such Delivery Notice (the "Applicable Participation Agreement") and cause such certificates, documents and legal opinions relating to the Trustee to be duly delivered as required by the Applicable Participation Agreement. If at any time prior to the Applicable Delivery Date, the Trustee receives a notice of postponement pursuant to Section 1(e) or 1(f) of the Note Purchase Agreement, then the Trustee shall give the Depositary (with a copy to the Escrow Agent) a notice of cancellation of such Notice of Purchase Withdrawal relating to such Deposit or Deposits on such Applicable Delivery Date. Upon satisfaction of the conditions specified in the Note Purchase Agreement and the Applicable Participation Agreement, the Trustee shall 25 19 purchase the applicable Equipment Notes with the proceeds of the withdrawals of one or more Deposits made on the Applicable Delivery Date in accordance with the terms of the Deposit Agreement and the Escrow Agreement. The purchase price of such Equipment Notes shall equal the principal amount of such Equipment Notes. Amounts withdrawn from such Deposit or Deposits in excess of the purchase price of the Equipment Notes or to the extent not applied on the Applicable Delivery Date to the purchase price of the Equipment Notes, shall be re-deposited by the Trustee with the Depositary on the Applicable Delivery Date in accordance with the terms of the Deposit Agreement. Section 2.02. Withdrawal of Deposits. If any Deposits remain outstanding on the Business Day next succeeding the Cut-off Date, (i) the Trustee shall give the Escrow Agent notice that the Trustee's obligation to purchase Equipment Notes under the Note Purchase Agreement has terminated and instruct the Escrow Agent to provide a notice of Final Withdrawal to the Depositary substantially in the form of Exhibit B to the Deposit Agreement (the "Final Withdrawal Notice") and (ii) the Trustee will make a demand upon the Company under the Note Purchase Agreement for an amount equal to the Special Redemption Premium, such payment to be made on the Final Withdrawal Date. Section 2.03. Acceptance by Trustee. The Trustee, upon the execution and delivery of this Agreement, acknowledges its acceptance of all right, title and interest in and to the Trust Property and will hold such right, title and interest for the benefit of all then present and future Certificateholders, upon the trusts herein set forth. By its payment for and acceptance of each Certificate issued to it under this Agreement, each initial Holder of such Certificate as grantor of such Trust shall thereby join in the creation and declaration of such Trust. Section 2.04. Limitation of Powers. The Trust is constituted solely for the purpose of making the investment in the Equipment Notes, and, except as set forth herein, the Trustee shall not be authorized or empowered to acquire any other investments or engage in any other activities and, in particular, the Trustee shall not be authorized or empowered to do anything that would cause such Trust to fail to qualify as a "grantor trust" for federal income tax purposes (including, as subject to this restriction, acquiring any Aircraft (as defined in the respective Indentures) by bidding such Equipment Notes or otherwise, or taking any action with respect to any such Aircraft once acquired). 26 20 ARTICLE III THE CERTIFICATES Section 3.01. Title, Form, Denomination and Execution of Certificates. (a) The Initial Certificates shall be known as the "7.38% 1998-1A-O Initial Pass Through Certificates" and the Exchange Certificates shall be known as the "7.38% 1998-1A-O Exchange Pass Through Certificates", in each case, of the Trust. Each Certificate will represent a fractional undivided interest in the Trust and shall be substantially in the form set forth as Exhibit A hereto, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Agreement and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Certificates, as evidenced by their execution of the Certificates. Any portion of the text of any Certificate may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Certificate. (b) The Initial Certificates shall be issued only in fully registered form without coupons and only in denominations of $100,000 or integral multiples of $1,000 in excess thereof, except that one Certificate may be issued in a denomination of less than $100,000. The Exchange Certificates will be issued in denominations of $1,000 or integral multiples thereof. Each Certificate shall be dated the date of its authentication. The aggregate Fractional Undivided Interest of Certificates shall not at any time exceed $300,254,000. (c) Initial Certificates offered and sold in reliance on Rule 144A shall be issued initially in the form of a single permanent global Certificate in registered form, substantially in the form set forth as Exhibit A hereto (the "U.S. Global Certificate"), duly executed and authenticated by the Trustee as hereinafter provided. The U.S. Global Certificate will be registered in the name of a nominee for the Depositary and deposited with the Trustee, as custodian for the Depositary. The aggregate principal amount of the U.S. Global Certificate may from time to time be increased or decreased by adjustments made on the records of the Depositary or its nominee, or of the Trustee, as custodian for the Depositary or its nominee, as hereinafter provided. (d) Initial Certificates offered and sold in offshore transactions in reliance on Regulation S shall be issued initially in the form of a single temporary global Certificate in registered form, substantially in the form set forth as Exhibit A hereto (the "Temporary Offshore Global Certificate") duly executed and authenticated by the Trustee as hereinafter provided. The Temporary Offshore Global Certificates will be registered in the name of a nominee of the Depositary for credit to the account of the Agent Members acting as depositaries for Euroclear and Cedel and deposited with the Trustee as custodian for the 27 21 Depositary. At any time following March 21, 1998 (the "Offshore Certificates Exchange Date"), upon receipt by the Trustee of a certificate substantially in the form of Exhibit B hereto, a single permanent global Certificate in registered form substantially in the form set forth in Exhibit A (the "Permanent Offshore Global Certificate"; and together with the Temporary Offshore Global Certificate, the "Offshore Global Certificates"), duly executed and authenticated by the Trustee as hereinafter provided, shall be registered in the name of a nominee for the Depositary and deposited with the Trustee, as custodian for the Depositary, and the Registrar shall reflect on its books and records the date of such transfer and a decrease in the principal amount of any Temporary Offshore Global Certificate in an amount equal to the principal amount of the beneficial interest in such Temporary Offshore Global Certificate transferred. The U.S. Global Certificate and the Offshore Global Certificates are sometimes referred to as the "Global Certificates". (e) Initial Certificates offered and sold to Institutional Accredited Investors shall be issued in the form of permanent certificated Certificates in registered form in substantially the form set forth as Exhibit A hereto (the "U.S. Physical Certificates"). Certificates issued pursuant to Section 3.05(b) in exchange for interests in any Offshore Global Certificate shall be in the form of permanent certificated Certificates in registered form substantially in the form set forth in Exhibit A (the "Offshore Physical Certificates"). The Offshore Physical Certificates and U.S. Physical Certificates are sometimes collectively herein referred to as the "Physical Certificates". (f) The Exchange Certificates shall be issued in the form of one or more global Certificates substantially in the form of Exhibit A hereto (each, a "Global Exchange Certificate"), except that (i) the Private Placement Legend (hereinafter defined) shall be omitted and (ii) such Exchange Certificates shall contain such appropriate insertions, omissions, substitutions and other variations from the form set forth in Exhibit A hereto relating to the nature of the Exchange Certificates as the Responsible Officer of the Trustee executing such Exchange Certificates on behalf of the Trust may determine, as evidenced by such officer's execution on behalf of the Trust of such Exchange Certificates. Such Global Exchange Certificates shall be in registered form and be registered in the name of DTC and deposited with the Trustee, at its Corporate Trust Office, as custodian for DTC. The aggregate principal amount of any Global Exchange Certificate may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC for such Global Exchange Certificate, which adjustments shall be conclusive as to the aggregate principal amount of any such Global Exchange Certificate. Subject to clause (i) and (ii) of the first sentence of this Section 3.01(f), the terms hereof applicable to Restricted Global Certificates and/or Global Certificates shall apply to the Global Exchange Certificates, mutatis mutandis. (g) The definitive Certificates shall be in registered form and shall be typed, printed, lithographed or engraved or produced by any combination of these methods 28 22 or may be produced in any other manner, all as determined by the officers executing such Certificates, as evidenced by their execution of such Certificates. Section 3.02. Restrictive Legends. (a) Subject to Section 3.06, unless and until (i) an Initial Certificate is sold under an effective Registration Statement or (ii) an Initial Certificate is exchanged for an Exchange Certificate pursuant to an effective Exchange Offer Registration Statement, in each case as provided for in the Registration Rights Agreement, each Global Certificate (other than the Permanent Offshore Global Certificate) and each U.S. Physical Certificate shall bear the following legend (the "Private Placement Legend") on the face thereof: THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS CERTIFICATE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT; (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFICATE WAS HELD BY ATLAS AIR, INC., THE TRUSTEE OR ANY AFFILIATE OF ANY OF SUCH PERSONS RESELL OR OTHERWISE TRANSFER THIS CERTIFICATE EXCEPT (A) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (B) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING $100,000 OR MORE AGGREGATE PRINCIPAL AMOUNT OF SUCH CERTIFICATE THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS CERTIFICATE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (E) PURSUANT TO AN 29 23 EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT; AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS CERTIFICATE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS CERTIFICATE WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFICATE WAS HELD BY ATLAS AIR, INC., THE TRUSTEE OR ANY AFFILIATE OF ANY OF SUCH PERSONS THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE PASS THROUGH TRUST AGREEMENT CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS CERTIFICATE IN VIOLATION OF THE FOREGOING RESTRICTIONS. (b) Each Global Certificate shall also bear the following legend on the face thereof: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE PASS THROUGH TRUST AGREEMENT REFERRED TO HEREIN. 30 24 Section 3.03. Authentication of Certificates. (a) On the Issuance Date, the Trustee shall duly execute, authenticate and deliver Certificates in authorized denominations equalling in the aggregate the amount set forth, with respect to the Trust, in Schedule II to the Placement Agreement, evidencing the entire ownership of the Trust, which amount equals the maximum aggregate principal amount of the Equipment Notes which may be purchased by the Trustee pursuant to the Note Purchase Agreement. (b) No Certificate shall be entitled to any benefit under this Agreement or be valid or obligatory for any purpose, unless there appears on such Certificate a certificate of authentication substantially in the form provided for herein executed by the Trustee by the manual signature of one of its authorized signatories, and such certificate upon any Certificate shall be conclusive evidence, and the only evidence, that such Certificate has been duly authenticated and delivered hereunder. Section 3.04. Transfer and Exchange. The Trustee shall cause to be kept at the office or agency to be maintained by it in accordance with the provisions of Section 7.12 of this Agreement a register (the "Register") for the Certificates in which, subject to such reasonable regulations as it may prescribe, the Trustee shall provide for the registration of the Certificates and of transfers and exchanges of the Certificates as herein provided. The Trustee shall initially be the registrar (the "Registrar") for the purpose of registering the Certificates and transfers and exchanges of the Certificates as herein provided. A Certificateholder may transfer a Certificate by written application to the Registrar stating the name of the proposed transferee and otherwise complying with the terms of this Agreement, including providing a written certificate or other evidence of compliance with any restrictions on transfer. No such transfer shall be effected until, and such transferee shall succeed to the rights of a Certificateholder only upon, final acceptance and registration of the transfer by the Registrar in the Register. Prior to the registration of any transfer by a Certificateholder as provided herein, the Trustee shall treat the person in whose name the Certificate is registered as the owner thereof for all purposes, and the Trustee shall not be affected by notice to the contrary. Furthermore, the Depositary shall, by acceptance of a Global Certificate, agree that transfers of beneficial interests in such Global Certificate may be effected only through a book-entry system maintained by the Depositary (or its agent), and that ownership of a beneficial interest in the Certificate shall be required to be reflected in a book entry. When Certificates are presented to the Registrar with a request to register the transfer or to exchange them for an equal face amount of Certificates of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its requirements for such transactions are met. To permit registrations of transfers and exchanges in accordance with the terms, conditions and restrictions hereof, the Trustee shall execute and authenticate Certificates at the Registrar's request. No service charge shall be made for any registration of transfer or exchange of the Certificates, but the Trustee may require payment by the transferor of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or 31 25 other similar governmental charges payable upon exchanges pursuant to Section 3.10 or 9.07). Section 3.05. Book-Entry Provisions for U.S. Global Certificate and Offshore Global Certificates. (a) Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Agreement with respect to any Global Certificate held on their behalf by the Depositary, or the Trustee as its custodian, and the Depositary may be treated by the Trustee and any agent of the Trustee as the absolute owner of such Global Certificate for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Trustee or any agent of the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or shall impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a holder of any Certificate. Upon the issuance of any Global Certificate, the Registrar or its duly appointed agent shall record a nominee of the Depositary as the registered holder of such Global Certificate. (b) Transfers of any Global Certificate shall be limited to transfers of such Global Certificate or Offshore Global Certificate in whole, but not in part, to nominees of the Depositary, its successor or such successor's nominees. Beneficial interests in the U.S. Global Certificate and any Offshore Global Certificate may be transferred in accordance with the rules and procedures of the Depositary and the provisions of Section 3.06. Beneficial interests in the U.S. Global Certificate or an Offshore Global Certificate shall be delivered to all beneficial owners in the form of U.S. Physical Certificates or Offshore Physical Certificates, as the case may be, if (i) the Depositary notifies the Trustee that it is unwilling or unable to continue as Depositary for the U.S. Global Certificate or such Offshore Global Certificate, as the case may be, and a successor depositary is not appointed by the Trustee within 90 days of such notice or (ii) an Event of Default has occurred and is continuing and the Registrar has received a request from the Depositary to issue Physical Certificates. (c) Any beneficial interest in one of the Global Certificates that is transferred to a Person who takes delivery in the form of an interest in the other Global Certificate will, upon such transfer, cease to be an interest in such Global Certificate and become an interest in the other Global Certificate and, accordingly, will thereafter be subject to all transfer restrictions, if any, and other procedures applicable to beneficial interests in such other Global Certificate for as long as it remains such an interest. (d) In connection with the transfer of the entire U.S. Global Certificate or an entire Offshore Global Certificate to the beneficial owners thereof pursuant to paragraph (b) of this Section 3.05, such U.S. Global Certificate or Offshore Global Certificate, as the case may be, shall be deemed to be surrendered to the Trustee for cancellation, and the Trustee shall execute, authenticate and deliver, to each beneficial owner identified by the Depositary in exchange for its beneficial interest in such U.S. Global Certificate or Offshore 32 26 Global Certificate, as the case may be, an equal aggregate principal amount of U.S. Physical Certificates or Offshore Physical Certificates, as the case may be, of authorized denominations. (e) Any U.S. Physical Certificate delivered in exchange for an interest in the U.S. Global Certificate pursuant to paragraph (b) of this Section 3.05 shall, except as otherwise provided by paragraph (f) of Section 3.06, bear the Private Placement Legend. (f) Any Offshore Physical Certificate delivered in exchange for an interest in an Offshore Global Certificate pursuant to paragraph (b) of this Section shall, except as otherwise provided by paragraph (f) of Section 3.06, bear the applicable legend regarding transfer restrictions set forth in Section 3.02(a). (g) The registered holder of the U.S. Global Certificate or any Offshore Global Certificate may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Agreement or the Certificates. Section 3.06. Special Transfer Provisions. Unless and until (i) an Initial Certificate is sold under an effective Registration Statement, or (ii) an Initial Certificate is exchanged for an Exchange Certificate pursuant to an effective Exchange Offer Registration Statement, in each case pursuant to the Registration Rights Agreement, the following provisions shall apply to such Initial Certificates: (a) Transfers to Non-QIB Institutional Accredited Investors. The following provisions shall apply with respect to the registration of any proposed transfer of a Certificate to any Institutional Accredited Investor which is not a QIB (excluding transfers to or by Non-U.S. Persons): (i) The Registrar shall register the transfer of any Certificate, whether or not such Certificate bears the Private Placement Legend, if (x) the requested transfer is at least three years after the later of the original issue date of the Certificates and the last date on which such Certificate was held by the Company or any affiliate of any such persons or (y) the proposed transferee has delivered to the Registrar a letter substantially in the form of Exhibit D hereto and the aggregate principal amount of the Certificates being transferred is at least $100,000. (ii) If the proposed transferor is an Agent Member holding a beneficial interest in the U.S. Global Certificate, upon receipt by the Registrar of (x) the documents, if any, required by paragraph (i) and (y) instructions given in accordance with the Depositary's and the Registrar's procedures, the 33 27 Registrar shall reflect on its books and records the date of the transfer and a decrease in the principal amount of such U.S. Global Certificate in an amount equal to the principal amount of the beneficial interest in such U.S. Global Certificate to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver to the transferor or at its direction, one or more U.S. Physical Certificates of like tenor and amount. (b) Transfers to QIBs. The following provisions shall apply with respect to the registration of any proposed transfer of an Initial Certificate to a QIB (excluding Non-U.S. Persons): (i) If the Certificate to be transferred consists of U.S. Physical Certificates or an interest in any Temporary Offshore Global Certificate, the Registrar shall register the transfer if such transfer is being made by a proposed transferor who has checked the box provided for on the form of Initial Certificate stating, or has otherwise advised the Trustee and the Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on the form of Initial Certificate stating, or has otherwise advised the Trustee and the Registrar in writing, that it is purchasing the Initial Certificate for its own account or an account with respect to which it exercises sole investment discretion and that it, or the Person on whose behalf it is acting with respect to any such account, is a QIB within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Trust and/or the Company as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A. (ii) Upon receipt by the Registrar of the documents referred to in clause (i) above and instructions given in accordance with the Depositary's and the Registrar's procedures therefor, the Registrar shall reflect on its books and records the date of such transfer and an increase in the principal amount of the U.S. Global Certificate in an amount equal to the principal amount of the U.S. Physical Certificates or interests in the Temporary Offshore Global Certificate, as the case may be, being transferred, and the Trustee shall cancel such Physical Certificates or decrease the amount of such Temporary Offshore Global Certificate so transferred. (c) Transfers of Interests in the Permanent Offshore Global Certificate or Offshore Physical Certificates. The Registrar shall register any transfer of interests in 34 28 the Permanent Offshore Global Certificate or Offshore Physical Certificates without requiring any additional certification. (d) Transfers to Non-U.S. Persons at Any Time. The following provisions shall apply with respect to any registration of any transfer of an Initial Certificate to a Non-U.S. Person: (i) Prior to the Offshore Certificates Exchange Date, the Registrar shall register any proposed transfer of an Initial Certificate to a Non-U.S. Person upon receipt of a certificate substantially in the form set forth as Exhibit C hereto from the proposed transferor. (ii) On and after the Offshore Certificates Exchange Date, the Registrar shall register any proposed transfer to any Non-U.S. Person if the Certificate to be transferred is a U.S. Physical Certificate or an interest in the U.S. Global Certificate, upon receipt of a certificate substantially in the form of Exhibit C from the proposed transferor. The Registrar shall promptly send a copy of such certificate to the Company. (iii) Upon receipt by the Registrar of (x) the documents, if any, required by paragraph (ii) and (y) instructions in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records the date of such transfer and a decrease in the principal amount of such U.S. Global Certificate in an amount equal to the principal amount of the beneficial interest in such U.S. Global Certificate to be transferred, and (B) upon receipt by the Registrar of instructions given in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Offshore Global Certificate in an amount equal to the principal amount of the U.S. Physical Certificate or the U.S. Global Certificate, as the case may be, to be transferred, and the Trustee shall cancel the Physical Certificate, if any, so transferred or decrease the amount of such U.S. Global Certificate. (e) Private Placement Legend. Upon the transfer, exchange or replacement of Certificates not bearing the Private Placement Legend, the Registrar shall deliver Certificates that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Certificates bearing the Private Placement Legend, the Registrar shall deliver only Certificates that bear the Private Placement Legend unless either (i) the circumstances contemplated by paragraph (a)(i)(x) or (e)(ii) of this Section 3.06 exist or (ii) there is delivered to the Registrar an Opinion of Counsel to 35 29 the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act. (f) General. By its acceptance of any Certificate bearing the Private Placement Legend, each Holder of such a Certificate acknowledges the restrictions on transfer of such Certificate set forth in this Agreement and agrees that it will transfer such Certificate only as provided in this Agreement. The Registrar shall not register a transfer of any Certificate unless such transfer complies with the restrictions on transfer of such Certificate set forth in this Agreement. In connection with any transfer of Certificates, each Certificateholder agrees by its acceptance of the Certificates to furnish the Registrar or the Trustee such certifications, legal opinions or other information as either of them may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or a transaction not subject to, the registration requirements of the Securities Act; provided that the Registrar shall not be required to determine the sufficiency of any such certifications, legal opinions or other information. Until such time as no Certificates remain Outstanding, the Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 3.05 or this Section 3.06. The Trustee, if not the Registrar at such time, shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar. Section 3.07. Mutilated, Destroyed, Lost or Stolen Certificates. If (a) any mutilated Certificate is surrendered to the Registrar or the Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Certificate and (b) there is delivered to the Registrar and the Trustee such security, indemnity or bond, as may be required by them to save each of them harmless, then, in the absence of notice to the Registrar or the Trustee that such destroyed, lost or stolen Certificate has been acquired by a bona fide purchaser, and provided that the requirements of Section 8-405 of the Uniform Commercial Code in effect in any applicable jurisdiction are met, the Trustee shall execute, authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate or Certificates, in authorized denominations and of like Fractional Undivided Interest and bearing a number not contemporaneously outstanding. In connection with the issuance of any new Certificate under this Section 3.07, the Trustee may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee and the Registrar) connected therewith. 36 30 Any duplicate Certificate issued pursuant to this Section 3.07 shall constitute conclusive evidence of the appropriate Fractional Undivided Interest in the Trust, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Certificates. Section 3.08. Persons Deemed Owners. Prior to due presentment of a Certificate for registration of transfer, the Trustee, the Registrar and any Paying Agent may treat the Person in whose name any Certificate is registered (as of the day of determination) as the owner of such Certificate for the purpose of receiving distributions pursuant to Article IV and for all other purposes whatsoever, and none of the Trustee, the Registrar or any Paying Agent shall be affected by any notice to the contrary. Section 3.09. Cancellation. All Certificates surrendered for payment or transfer or exchange shall, if surrendered to the Trustee or any agent of the Trustee other than the Registrar, be delivered to the Registrar for cancellation and shall promptly be cancelled by it. No Certificates shall be authenticated in lieu of or in exchange for any Certificates cancelled as provided in this Section, except as expressly permitted by this Agreement. All cancelled Certificates held by the Registrar shall be destroyed and a certification of their destruction delivered to the Trustee. Section 3.10. Temporary Certificates. Until definitive Certificates are ready for delivery, the Trustee shall authenticate temporary Certificates. Temporary Certificates shall be substantially in the form of definitive Certificates but may have insertions, substitutions, omissions and other variations determined to be appropriate by the officers executing the temporary Certificates, as evidenced by their execution of such temporary Certificates. If temporary Certificates are issued, the Trustee will cause definitive Certificates to be prepared without unreasonable delay. After the preparation of definitive Certificates, the temporary Certificates shall be exchangeable for definitive Certificates upon surrender of the temporary Certificates at the office or agency of the Trustee designated for such purpose pursuant to Section 7.12, without charge to the Certificateholder. Upon surrender for cancellation of any one or more temporary Certificates, the Trustee shall execute, authenticate and deliver in exchange therefor a like face amount of definitive Certificates of authorized denominations. Until so exchanged, the temporary Certificates shall be entitled to the same benefits under this Agreement as definitive Certificates. Section 3.11. Limitation of Liability for Payments. All payments and distributions made to Certificateholders shall be made only from the Trust Property and only to the extent that the Trustee shall have sufficient income or proceeds from the Trust 37 31 Property to make such payments in accordance with the terms of Article IV of this Agreement. Each Certificateholder, by its acceptance of a Certificate, agrees that it will look solely to the income and proceeds from the Trust Property for any payment or distribution due to such Certificateholder pursuant to the terms of this Agreement and that it will not have any recourse to the Company, the Trustee, the Loan Trustees, the Liquidity Providers, the Owner Trustees or the Owner Participants, except as otherwise expressly provided herein or in the Intercreditor Agreement. The Company is a party to this Agreement solely for purposes of meeting the requirements of the Trust Indenture Act, and therefore shall not have any right, obligation or liability hereunder (except as otherwise expressly provided herein). ARTICLE IV DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS Section 4.01. Certificate Account and Special Payments Account. (a) The Trustee shall establish and maintain on behalf of the Certificateholders a Certificate Account as one or more non-interest-bearing accounts. The Trustee shall hold such Certificate Account in trust for the benefit of the Certificateholders, and shall make or permit withdrawals therefrom only as provided in this Agreement. On each day when a Scheduled Payment is made to the Trustee under the Intercreditor Agreement with respect to the Certificates, the Trustee, upon receipt thereof, shall immediately deposit the aggregate amount of such Scheduled Payment in such Certificate Account. (b) The Trustee shall establish and maintain on behalf of the Certificateholders a Special Payments Account as one or more accounts, which shall be non-interest bearing except as provided in Section 4.04. The Trustee shall hold the Special Payments Account in trust for the benefit of the Certificateholders and shall make or permit withdrawals therefrom only as provided in this Agreement. On each day when one or more Special Payments are made to the Trustee under the Intercreditor Agreement and upon payment of the Special Redemption Premium to the Trustee under the Note Purchase Agreement with respect to the Certificates, the Trustee, upon receipt thereof, shall immediately deposit the aggregate amount of such Special Payments in such Special Payments Account. (c) The Trustee shall present (or, if applicable, cause the Subordination Agent to present) to the related Loan Trustee of each Equipment Note such Equipment Note on the date of its stated final maturity or, in the case of any Equipment Note which is to be 38 32 redeemed in whole pursuant to the related Indenture, on the applicable redemption date under such Indenture. Section 4.02. Distributions from Certificate Account and Special Payments Account. (a) On each Regular Distribution Date with respect to a series of Certificates or as soon thereafter as the Trustee has confirmed receipt of the payment of all or any part of the Scheduled Payments due on the Equipment Notes held (subject to the Intercreditor Agreement) in the related Trust on such date, the Trustee shall distribute out of the applicable Certificate Account the entire amount deposited therein pursuant to Section 4.01(a). There shall be so distributed to each Certificateholder of record of such series on the Record Date with respect to such Regular Distribution Date (other than as provided in Section 11.01 concerning the final distribution) by check mailed to such Certificateholder, at the address appearing in the Register, such Certificateholder's pro rata share (based on the Fractional Undivided Interest in the Trust held by such Certificateholder) of the total amount in the applicable Certificate Account, except that, with respect to Certificates registered on the Record Date in the name of a Clearing Agency (or its nominee), such distribution shall be made by wire transfer in immediately available funds to the account designated by such Clearing Agency (or such nominee). (b) On each Special Distribution Date with respect to any Special Payment with respect to the Certificates or as soon thereafter as the Trustee has confirmed receipt of any Special Payments due on the Equipment Notes held (subject to the Intercreditor Agreement) in the related Trust or realized upon the sale of such Equipment Notes or receipt of the Special Redemption Premium, the Trustee shall distribute out of the applicable Special Payments Account the entire amount of such applicable Special Payment deposited therein pursuant to Section 4.01(b). There shall be so distributed to each Certificateholder of record of such series on the Record Date with respect to such Special Distribution Date (other than as provided in Section 11.01 concerning the final distribution) by check mailed to such Certificateholder, at the address appearing in the Register, such Certificateholder's pro rata share (based on the Fractional Undivided Interest in the related Trust held by such Certificateholder) of the total amount in the applicable Special Payments Account on account of such Special Payment, except that, with respect to Certificates registered on the Record Date in the name of a Clearing Agency (or its nominee), such distribution shall be made by wire transfer in immediately available funds to the account designated by such Clearing Agency (or such nominee). (c) The Trustee shall, at the expense of the Company, cause notice of each Special Payment with respect to a series of Certificates to be mailed to each Certificateholder at his address as it appears in the Register. In the event of redemption or purchase of Equipment Notes held in the related Trust, such notice shall be mailed not less than 15 days prior to the Special Distribution Date for the Special Payment resulting from such redemption or purchase, which Special Distribution Date shall be the date of such redemption or 39 33 purchase. In the event that any Special Redemption Premium is to be paid by the Company to the Trustee under the Note Purchase Agreement, such notice shall be mailed, together with the notice by the Escrow Paying Agent under Section 2.06 of the Escrow Agreement, not less than 20 days prior to the Special Distribution Date for such amount, which Special Distribution Date shall be the Final Withdrawal Date. In the case of any other Special Payments, such notice shall be mailed as soon as practicable after the Trustee has confirmed that it has received funds for such Special Payment, stating the Special Distribution Date for such Special Payment which shall occur not less than 15 days after the date of such notice and as soon as practicable thereafter. Notices mailed by the Trustee shall set forth: (i) the Special Distribution Date and the Record Date therefor (except as otherwise provided in Section 11.01); (ii) the amount of the Special Payment for each $1,000 face amount Certificate and the amount thereof constituting principal, premium, if any, and interest; (iii) the reason for the Special Payment; and (iv) if the Special Distribution Date is the same date as a Regular Distribution Date for the Certificates, the total amount to be received on such date for each $1,000 face amount Certificate. If the amount of (i) premium, if any, payable upon the redemption or purchase of an Equipment Note or (ii) the Special Redemption Premium, if any, has not been calculated at the time that the Trustee mails notice of a Special Payment, it shall be sufficient if the notice sets forth the other amounts to be distributed and states that any premium received will also be distributed. If any redemption of the Equipment Notes held in any Trust is cancelled, the Trustee, as soon as possible after learning thereof, shall cause notice thereof to be mailed to each Certificateholder at its address as it appears on the Register. Section 4.03. Statements to Certificateholders. (a) On each Regular Distribution Date and Special Distribution Date, the Trustee will include with each distribution of a Scheduled Payment or Special Payment, as the case may be, to Certificateholders a statement setting forth the information provided below (in the case of a Special Payment, including any Special Redemption Premium, reflecting in part the information provided by the Escrow Paying Agent under the Escrow Agreement). Such statement shall set forth (per $1,000 aggregate principal amount of Certificate as to (ii), (iii), (iv) and (v) below) the following information: 40 34 (i) the aggregate amount of funds distributed on such Distribution Date under the Agreement and under the Escrow Agreement, indicating the amount allocable to each source; (ii) the amount of such distribution under this Agreement allocable to principal and the amount allocable to premium (including the Special Redemption Premium), if any; (iii) the amount of such distribution under this Agreement allocable to interest; (iv) the amount of such distribution under the Escrow Agreement allocable to interest; (v) the amount of such distribution under the Escrow Agreement allocable to Deposits; and (vi) the Pool Balance and the Pool Factor. With respect to the Certificates registered in the name of a Clearing Agency or its nominee, on the Record Date prior to each Distribution Date, the Trustee will request from the Clearing Agency a securities position listing setting forth the names of all Clearing Agency Participants reflected on the Clearing Agency's books as holding interests in the Certificates on such Record Date. On each Distribution Date, the Trustee will mail to each such Clearing Agency Participant the statement described above and will make available additional copies as requested by such Clearing Agency Participant for forwarding to holders of interests in the Certificates. (b) Within a reasonable period of time after the end of each calendar year but not later than the latest date permitted by law, the Trustee shall furnish to each Person who at any time during such calendar year was a Certificateholder of record a statement containing the sum of the amounts determined pursuant to clauses (a)(i), (a)(ii), (a)(iii), (a)(iv) and (a)(v) above with respect to the related Trust for such calendar year or, in the event such Person was a Certificateholder of record during a portion of such calendar year, for the applicable portion of such year, and such other items as are readily available to the Trustee and which a Certificateholder shall reasonably request as necessary for the purpose of such Certificateholder's preparation of its federal income tax returns. Such statement and such other items shall be prepared on the basis of information supplied to the Trustee by the Clearing Agency Participants and shall be delivered by the Trustee to such Clearing Agency Participants to be available for forwarding by such Clearing Agency Participants to the holders of interests in the Certificates in the manner described in Section 4.03(a). 41 35 (c) Promptly following (i) the Delivery Period Termination Date, if there has been any change in the information set forth in clauses (x), (y) and (z) below from that set forth in page 65 of the Offering Memorandum, and (ii) any early redemption or purchase of, or any default in the payment of principal or interest in respect of, any of the Equipment Notes held in the Trust, or any Final Withdrawal, the Trustee shall furnish to Certificateholders of record on such date a statement setting forth (x) the expected Pool Balances for each subsequent Regular Distribution Date following the Delivery Period Termination Date, (y) the related Pool Factors for such Regular Distribution Dates and (z) the expected principal distribution schedule of the Equipment Notes, in the aggregate, held as Trust Property at the date of such notice. With respect to the Certificates registered in the name of a Clearing Agency, on the Delivery Period Termination Date, the Trustee will request from such Clearing Agency a securities position listing setting forth the names of all Clearing Agency Participants reflected on such Clearing Agency's books as holding interests in the Certificates on such date. The Trustee will mail to each such Clearing Agency Participant the statement described above and will make available additional copies as requested by such Clearing Agency Participant for forwarding to holders of interests in the Certificates. Section 4.04. Investment of Special Payment Moneys. Any money received by the Trustee pursuant to Section 4.01(b) representing a Special Payment which is not distributed on the date received shall, to the extent practicable, be invested in Permitted Investments by the Trustee pending distribution of such Special Payment pursuant to Section 4.02. Any investment made pursuant to this Section 4.04 shall be in such Permitted Investments having maturities not later than the date that such moneys are required to be used to make the payment required under Section 4.02 on the applicable Special Distribution Date and the Trustee shall hold any such Permitted Investments until maturity. The Trustee shall have no liability with respect to any investment made pursuant to this Section 4.04, other than by reason of the willful misconduct or negligence of the Trustee. All income and earnings from such investments shall be distributed on such Special Distribution Date as part of such Special Payment. ARTICLE V THE COMPANY Section 5.01. Maintenance of Corporate Existence. The Company, at its own cost and expense, will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights and franchises, except as otherwise specifically permitted in Section 5.02; provided, however, that the Company shall not be required to preserve any right or franchise if the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company. 42 36 Section 5.02. Consolidation, Merger, Etc. The Company shall not consolidate with or merge into any other corporation or convey, transfer or lease substantially all of its assets as an entirety to any Person unless: (a) the corporation formed by such consolidation or into which the Company is merged or the Person that acquires by conveyance, transfer or lease substantially all of the assets of the Company as an entirety shall be (i) organized and validly existing under the laws of the United States of America or any state thereof or the District of Columbia, (ii) a "citizen of the United States" as defined in 49 U.S.C. Section 40102(a)(15), as amended, and (iii) a United States certificated air carrier, if and so long as such status is a condition of entitlement to the benefits of Section 1110 of the Bankruptcy Reform Act of 1978, as amended (11 U.S.C. Section 1110), with respect to the Leases or the Aircraft owned by the Company; (b) the corporation formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance, transfer or lease substantially all of the assets of the Company as an entirety shall execute and deliver to the Trustee applicable to the Certificates a duly authorized, valid, binding and enforceable agreement in form and substance reasonably satisfactory to the Trustee containing an assumption by such successor corporation or Person of the due and punctual performance and observance of each covenant and condition of the Note Documents and of this Agreement applicable to the Certificates to be performed or observed by the Company; and (c) the Company shall have delivered to the Trustee an Officer's Certificate of the Company and an Opinion of Counsel of the Company reasonably satisfactory to the Trustee, each stating that such consolidation, merger, conveyance, transfer or lease and the assumption agreement mentioned in clause (b) above comply with this Section 5.02 and that all conditions precedent herein provided for relating to such transaction have been complied with. Upon any consolidation or merger, or any conveyance, transfer or lease of substantially all of the assets of the Company as an entirety in accordance with this Section 5.02, the successor corporation or Person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Agreement applicable to the Certificates with the same effect as if such successor corporation or Person had been named as the Company herein. No such conveyance, transfer or lease of substantially all of the assets of the Company as an entirety shall have the effect of releasing any successor corporation or Person which shall have become such in the manner prescribed in this Section 5.02 from its liability in respect of this Agreement and any Note Document applicable to the Certificates to which it is a party. 43 37 ARTICLE VI DEFAULT Section 6.01. Events of Default. (a) Exercise of Remedies. Upon the occurrence and during the continuation of any Indenture Default under any Indenture, the Trustee may, to the extent it is the Controlling Party at such time (as determined pursuant to the Intercreditor Agreement), direct the exercise of remedies as provided in the Intercreditor Agreement. (b) Purchase Rights of Certificateholders. By acceptance of its Certificate, each Certificateholder agrees that at any time after the occurrence and during the continuation of a Triggering Event, (i) each Class B Certificateholder shall have the right to purchase all, but not less than all, of the Certificates upon ten days' written notice to the Trustee and each other Class B Certificateholder, provided that (A) if prior to the end of such ten-day period any other Class B Certificateholder notifies such purchasing Class B Certificateholder that such other Class B Certificateholder wants to participate in such purchase, then such other Class B Certificateholder may join with the purchasing Class B Certificateholder to purchase all, but not less than all, of the Certificates pro rata based on the Fractional Undivided Interest in the Class B Trust held by each such Class B Certificateholder and (B) if prior to the end of such ten-day period any other Class B Certificateholder fails to notify the purchasing Class B Certificateholder of such other Class B Certificateholder's desire to participate in such a purchase, then such other Class B Certificateholder shall lose its right to purchase the Certificates pursuant to this Section 6.01(b); (ii) each Class C Certificateholder shall have the right (which shall not expire upon any purchase of the Certificates pursuant to clause (i) above) to purchase all, but not less than all, of the Certificates and the Class B Certificates upon ten days' written notice to the Trustee, the Class B Trustee and each other Class C Certificateholder, provided that (A) if prior to the end of such ten-day period any other Class C Certificateholder notifies such purchasing Class C Certificateholder that such other Class C Certificateholder wants to participate in such purchase, then such other Class C Certificateholder may join with the purchasing Class C Certificateholder to purchase all, but not less than all, of the Certificates and the Class B Certificates pro rata based on the Fractional Undivided Interest in the Class C Trust held by each such Class C Certificateholder and (B) if prior to the end of such ten-day period any other Class C Certificateholder fails to notify the purchasing Class C Certificateholder of such other Class C Certificateholder's desire to participate in 44 38 such a purchase, then such other Class C Certificateholder shall lose its right to purchase the Certificates pursuant to this Section 6.01(b); and (iii) each Class D Certificateholder shall have the right (which shall not expire upon any purchase of the Certificates pursuant to clause (i) or (ii) above) to purchase all, but not less than all, of the Certificates, the Class B Certificates and the Class C Certificates upon ten days' written notice to the Trustee, the Class B Trustee, the Class C Trustee and each other Class D Certificateholder, provided that (A) if prior to the end of such ten-day period any other Class D Certificateholder notifies such purchasing Class D Certificateholder that such other Class D Certificateholder wants to participate in such purchase, then such other Class D Certificateholder may join with the purchasing Class D Certificateholder to purchase all, but not less than all, of the Certificates, the Class B Certificates and the Class C Certificates pro rata based on the Fractional Undivided Interest in the Class D Trust held by each such Class D Certificateholder and (B) if prior to the end of such ten-day period any other Class D Certificateholder fails to notify the purchasing Class D Certificateholder of such other Class D Certificateholder's desire to participate in such a purchase, then such other Class D Certificateholder shall lose its right to purchase the Certificates pursuant to this Section 6.01(b). The purchase price with respect to the Certificates shall be equal to the Pool Balance of the Certificates, together with accrued and unpaid interest thereon to the date of such purchase, without premium, but including any other amounts then due and payable to the Certificateholders under this Agreement, the Intercreditor Agreement, the Escrow Agreement or any Note Document or on or in respect of the Certificates; provided, however, that (i) if such purchase occurs after the record date specified in Section 2.03(b) of the Escrow Agreement relating to the distribution of unused Deposits and accrued and unpaid interest thereunder, such purchase price shall be reduced by the aggregate amount of unused Deposits and interest to be distributed under the Escrow Agreement (which deducted amounts shall remain distributable to, and may be retained by, the Certificateholder as of such Record Date) and (ii) if such purchase occurs after a Record Date, such purchase price shall be reduced by the amount to be distributed hereunder on the related Distribution Date (which deducted amounts shall remain distributable to, and may be retained by, the Certificateholder as of such Record Date); provided further that no such purchase of Certificates shall be effective unless the purchaser(s) shall certify to the Trustee that contemporaneously with such purchase, such purchaser(s) is purchasing, pursuant to the terms of this Agreement and the Other Agreements, the Certificates, the Class B Certificates and the Class C Certificates which are senior to the securities held by such purchaser(s). Each payment of the purchase price of the Certificates referred to in the first sentence hereof shall be made to an account or accounts designated by the Trustee and each such purchase shall be subject to the terms of this Section 6.01(b). Each Certificateholder agrees by its acceptance of its Certificate that it will, subject to Section 3.04 of this Agreement, upon payment from such Class B 45 39 Certificateholder(s), Class C Certificateholder(s) or Class D Certificateholder(s), as the case may be, of the purchase price set forth in the first sentence of this paragraph, forthwith sell, assign, transfer and convey to the purchaser(s) thereof (without recourse, representation or warranty of any kind except for its own acts), all of the right, title, interest and obligation of such Certificateholder in this Agreement, the Escrow Agreement, the Deposit Agreement, the Intercreditor Agreement, the Liquidity Facilities, the Note Documents and all Certificates and Escrow Receipts held by such Certificateholder (excluding all right, title and interest under any of the foregoing to the extent such right, title or interest is with respect to an obligation not then due and payable as respects any action or inaction or state of affairs occurring prior to such sale) and the purchaser shall assume all of such Certificateholder's obligations under this Agreement, the Escrow Agreement, the Deposit Agreement, the Intercreditor Agreement, the Liquidity Facilities, the Note Documents and all such Certificates and Escrow Receipts. The Certificates will be deemed to be purchased on the date payment of the purchase price is made notwithstanding the failure of the Certificateholders to deliver any Certificates and, upon such a purchase, (i) the only rights of the Certificateholders will be to deliver the Certificates to the purchaser(s) and receive the purchase price for such Certificates and (ii) if the purchaser(s) shall so request, such Certificateholder will comply with all the provisions of Section 3.04 of this Agreement to enable new Certificates to be issued to the purchaser in such denominations as it shall request. All charges and expenses in connection with the issuance of any such new Certificates shall be borne by the purchaser thereof. As used in this Section 6.01, the terms "Class B Certificateholder", "Class B Trust", "Class B Certificate", "Class B Trustee", "Class C Certificate", "Class C Certificateholder", "Class C Trust", "Class C Trustee", "Class D Certificateholder" and "Class D Trust", shall have the respective meanings assigned to such terms in the Intercreditor Agreement. Section 6.02. Incidents of Sale of Equipment Notes. Upon any sale of all or any part of the Equipment Notes held in the Trust made either under the power of sale given under this Agreement or otherwise for the enforcement of this Agreement, the following shall be applicable: (a) Certificateholders and Trustee May Purchase Equipment Notes. Any Certificateholder, the Trustee in its individual or any other capacity or any other Person may bid for and purchase any of the Equipment Notes held in the Trust, and upon compliance with the terms of sale, may hold, retain, possess and dispose of such Equipment Notes in their own absolute right without further accountability. (b) Receipt of Trustee Shall Discharge Purchaser. The receipt of the Trustee making such sale shall be a sufficient discharge to any purchaser for his purchase money, and, after paying such purchase money and receiving such receipt, 46 40 such purchaser or its personal representative or assigns shall not be obliged to see to the application of such purchase money, or be in any way answerable for any loss, misapplication or nonapplication thereof. (c) Application of Moneys Received upon Sale. Any moneys collected by the Trustee upon any sale made either under the power of sale given by this Agreement or otherwise for the enforcement of this Agreement shall be applied as provided in Section 4.02. Section 6.03. Judicial Proceedings Instituted by Trustee; Trustee May Bring Suit. If there shall be a failure to make payment of the principal of, premium, if any, or interest on any Equipment Note held in the Trust, or if there shall be any failure to pay Rent (as defined in the relevant Lease) under any Lease when due and payable, then the Trustee, in, its own name and as trustee of an express trust, as holder of such Equipment Notes, to the extent permitted by and in accordance with the terms of any related Intercreditor Agreement and any related Note Documents (subject to rights of the applicable Owner Trustee or Owner Participant to cure any such failure to pay principal of, premium, if any, or interest on any Equipment Note or to pay Rent under any Lease in accordance with the applicable Indenture), shall be entitled and empowered to institute any suits, actions or proceedings at law, in equity or otherwise, for the collection of the sums so due and unpaid on such Equipment Notes or under such Lease and may prosecute any such claim or proceeding to judgment or final decree with respect to the whole amount of any such sums so due and unpaid. Section 6.04. Control by Certificateholders. Subject to Section 6.03 and the Intercreditor Agreement, the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the related Trust shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee with respect to the Trust or pursuant to the terms of the Intercreditor Agreement, or exercising any trust or power conferred on the Trustee under this Agreement or the Intercreditor Agreement, including any right of the Trustee as Controlling Party under the Intercreditor Agreement or as holder of the Equipment Notes held in the related Trust; provided, however, that (a) such Direction shall not in the opinion of the Trustee be in conflict with any rule of law or with this Agreement and would not involve the Trustee in personal liability or expense, (b) the Trustee shall not determine that the action so directed would be unjustly prejudicial to the Certificateholders not taking part in such Direction, and 47 41 (c) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such Direction. Section 6.05. Waiver of Past Defaults. Subject to any related Intercreditor Agreement, the Certificateholders holding Certificates of a series evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust (i) may on behalf of all of the Certificateholders waive any past Event of Default hereunder and its consequences or (ii) if the Trustee is the Controlling Party, may direct the Trustee to instruct the applicable Loan Trustee to waive any past Indenture Event of Default under any related Indenture and its consequences, and thereby annul any Direction given by such Certificateholders or the Trustee to such Loan Trustee with respect thereto, except a default: (a) in the deposit of any Scheduled Payment or Special Payment under Section 4.01 or in the distribution of any payment under Section 4.02 on the Certificates, or (b) in the payment of the principal of (premium, if any) or interest on the Equipment Notes held in the Trust, or (c) in respect of a covenant or provision hereof which under Article IX hereof cannot be modified or amended without the consent of each Certificateholder holding an Outstanding Certificate of a series affected thereby. Upon any such waiver, such default shall cease to exist with respect to the Certificates and any Event of Default arising therefrom shall be deemed to have been cured for every purpose and any direction given by the Trustee on behalf of the Certificateholders to the relevant Loan Trustee shall be annulled with respect thereto; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Upon any such waiver, the Trustee shall vote the Equipment Notes issued under the relevant Indenture to waive the corresponding Indenture Event of Default. Section 6.06. Right of Certificateholders to Receive Payments Not to Be Impaired. Anything in this Agreement to the contrary notwithstanding, including, without limitation, Section 6.07 hereof, but subject to the Intercreditor Agreement, the right of any Certificateholder to receive distributions of payments required pursuant to Section 4.02 hereof on the applicable Certificates when due, or to institute suit for the enforcement of any such payment on or after the applicable Regular Distribution Date or Special Distribution Date, shall not be impaired or affected without the consent of such Certificateholder. Section 6.07. Certificateholders May Not Bring Suit Except Under Certain Conditions. A Certificateholder shall not have the right to institute any suit, action or proceeding at law or in equity or otherwise with respect to this Agreement, for the 48 42 appointment of a receiver or for the enforcement of any other remedy under this Agreement, unless: (a) such Certificateholder previously shall have given written notice to the Trustee of a continuing Event of Default; (b) Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than 25% of the related Trust shall have requested the Trustee in writing to institute such action, suit or proceeding and shall have offered to the Trustee indemnity as provided in Section 7.03(e); (c) the Trustee shall have refused or neglected to institute any such action, suit or proceeding for 60 days after receipt of such notice, request and offer of indemnity; and (d) no direction inconsistent with such written request shall have been given to the Trustee during such 60-day period by Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust. It is understood and intended that no one or more of the Certificateholders shall have any right in any manner whatsoever hereunder or under the related Trust Supplement or under the Certificates to (i) surrender, impair, waive, affect, disturb or prejudice any property in the Trust Property of the Trust, or the lien of any related Indenture on any property subject thereto, or the rights of the Certificateholders or the holders of the Equipment Notes, (ii) obtain or seek to obtain priority over or preference with respect to any other such Certificateholder or (iii) enforce any right under this Agreement, except in the manner herein provided and for the equal, ratable and common benefit of all the Certificateholders subject to the provisions of this Agreement. Section 6.08. Remedies Cumulative. Every remedy given hereunder to the Trustee or to any of the Certificateholders shall not be exclusive of any other remedy or remedies, and every such remedy shall be cumulative and in addition to every other remedy given hereunder or now or hereafter given by statute, law, equity or otherwise. Section 6.09. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Agreement, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of such suit, and may assess costs against any such party litigant, in the manner and to the extent provided in the Trust Indenture Act; provided, however, that neither this Section 6.09 nor the Trust Indenture Act shall be deemed to 49 43 authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Company. ARTICLE VII THE TRUSTEE Section 7.01. Certain Duties and Responsibilities. (a) Except during the continuance of an Event of Default in respect of a Trust, the Trustee undertakes to perform such duties in respect of the Trust as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Trustee. (b) In case an Event of Default in respect of a Trust has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Agreement in respect of the Trust, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (c) No provision of this Agreement shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that (i) this Subsection shall not be construed to limit the effect of Subsection (a) of this Section 7.01; and (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts. (d) Whether or not herein expressly so provided, every provision of this Agreement relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 7.01. Section 7.02. Notice of Defaults. As promptly as practicable after, and in any event within 90 days after, the occurrence of any default (as such term is defined below) hereunder known to the Trustee, the Trustee shall transmit by mail to the Company, any Owner Trustees, the Owner Participants, the Loan Trustees and the Certificateholders holding Certificates in accordance with Section 313(c) of the Trust Indenture Act, notice of such default hereunder known to the Trustee, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal, premium, if any, or interest on any Equipment Note, the Trustee shall be protected 50 44 in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith shall determine that the withholding of such notice is in the interests of the Certificateholders. For the purpose of this Section 7.02 in respect of any Trust, the term "default" means any event that is, or after notice or lapse of time or both would become, an Event of Default in respect of that Trust. Section 7.03. Certain Rights of Trustee. Subject to the provisions of Section 315 of the Trust Indenture Act: (a) the Trustee may rely and shall be protected in acting or refraining from acting in reliance upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Request; (c) whenever in the administration of this Agreement or the Intercreditor Agreement, the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officer's Certificate of the Company, any Owner Trustee or any Loan Trustee; (d) the Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement or the Intercreditor Agreement at the Direction of any of the Certificateholders pursuant to this Agreement or the Intercreditor Agreement, unless the Certificateholders shall have offered to the Trustee reasonable security or indemnity against the cost, expenses and liabilities which might be incurred by it in compliance with such Direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document; 51 45 (g) the Trustee may execute any of the trusts or powers under this Agreement or the Intercreditor Agreement or perform any duties under this Agreement or the Intercreditor Agreement either directly or by or through agents or attorneys, and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it under this Agreement or the Intercreditor Agreement; (h) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the Direction of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Agreement or the Intercreditor Agreement; and (i) the Trustee shall not be required to expend or risk its own funds in the performance of any of its duties under this Agreement, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk is not reasonably assured to it. Section 7.04. Not Responsible for Recitals or Issuance of Certificates. The recitals contained herein and in the Certificates, except the certificates of authentication, shall not be taken as the statements of the Trustee, and the Trustee assumes no responsibility for their correctness. Subject to Section 7.15, the Trustee makes no representations as to the validity or sufficiency of this Agreement, any Equipment Notes, the Intercreditor Agreement, the Deposit Agreement, the Escrow Agreement, the Certificates, or any Note Documents, except that the Trustee hereby represents and warrants that this Agreement has been, and the Registration Rights Agreement, each Certificate, the Note Purchase Agreement, the Escrow Agreement and the Intercreditor Agreement will be, executed and delivered by one of its officers who is duly authorized to execute and deliver such document on its behalf. Section 7.05. May Hold Certificates. The Trustee, any Paying Agent, Registrar or any of their Affiliates or any other agent, in their respective individual or any other capacity, may become the owner or pledgee of Certificates and, subject to Sections 310(b) and 311 of the Trust Indenture Act, if applicable, may otherwise deal with the Company, any Owner Trustees or the Loan Trustees with the same rights it would have if it were not Trustee, Paying Agent, Registrar or such other agent. Section 7.06. Money Held in Trust. Money held by the Trustee or the Paying Agent in trust under this Agreement need not be segregated from other funds except to the extent required herein or by law and neither the Trustee nor the Paying Agent shall have any liability for interest upon any such moneys except as provided for herein. 52 46 Section 7.07. Compensation and Reimbursement. The Company agrees: (a) to pay, or cause to be paid, to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); and (b) to reimburse, or cause to be reimbursed, the Trustee upon its request for all reasonable out- of-pocket expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Agreement or the Intercreditor Agreement (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence, willful misconduct or bad faith or as may be incurred due to the Trustee's breach of its representations and warranties set forth in Section 7.15; and (c) to indemnify the Trustee with respect to the Certificates, pursuant to Section 8.1 of the Owned Aircraft Participation Agreements and Section 9.1 of the Leased Aircraft Participation Agreements, as the case may be. The Trustee shall be entitled to reimbursement from, and shall have a lien prior to the Certificates upon, all property and funds held or collected by the Trustee in its capacity as Trustee for any tax incurred without negligence, bad faith or willful misconduct, on its part, arising out of or in connection with the acceptance or administration of the Trust (other than any tax attributable to the Trustee's compensation for serving as such), including any costs and expenses incurred in contesting the imposition of any such tax. The Trustee shall notify the Company of any claim for any tax for which it may seek reimbursement. If the Trustee reimburses itself from the Trust Property of such Trust for any such tax, it will mail a brief report within 30 days setting forth the amount of such tax and the circumstances thereof to all Certificateholders as their names and addresses appear in the Register. Section 7.08. Corporate Trustee Required; Eligibility. The Trust shall at all times have a Trustee which shall be eligible to act as a trustee under Section 310(a) of the Trust Indenture Act and shall have a combined capital and surplus of at least $75,000,000 (or a combined capital and surplus in excess of $5,000,000 and the obligations of which, whether now in existence or hereafter incurred, are fully and unconditionally guaranteed by a corporation organized and doing business under the laws of the United States, any state or territory thereof or of the District of Columbia and having a combined capital and surplus of at least $75,000,000). If such corporation publishes reports of conditions at least annually, pursuant to law or to the requirements of federal, state, territorial or District of Columbia supervising or examining authority, then for the purposes of this Section 7.08 the combined 53 47 capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of conditions so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 7.08 to act as Trustee of the Trust, the Trustee shall resign immediately as Trustee of the Trust in the manner and with the effect specified in Section 7.09. Section 7.09. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee of the Trust pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 7.10. (b) The Trustee may resign at any time as Trustee of the Trust by giving prior written notice thereof to the Company, the Authorized Agents, the Owner Trustees and the Loan Trustees. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Company, the Owner Trustees and the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by Direction of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in such Trust delivered to the Trustee and to the Company, the Owner Trustees and the Loan Trustees. (d) If at any time in respect of the Trust: (i) the Trustee shall fail to comply with Section 310 of the Trust Indenture Act, if applicable, after written request therefor by the Company or by any Certificateholder who has been a bona fide Certificateholder for at least six months; or (ii) the Trustee shall cease to be eligible under Section 7.08 and shall fail to resign after written request therefor by the Company or by any such Certificateholder; or (iii) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; 54 48 then, in any case, (i) the Company may remove the Trustee or (ii) any Certificateholder who has been a bona fide Certificateholder for at least six months may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee of the Trust. (e) If a Responsible Officer of the Trustee shall obtain actual knowledge of an Avoidable Tax (as defined below) in respect of any Trust which has been or is likely to be asserted, the Trustee shall promptly notify the Company and shall, within 30 days of such notification, resign as Trustee of such Trust hereunder unless within such 30-day period the Trustee shall have received notice that the Company has agreed to pay such tax. The Company shall promptly appoint a successor Trustee of such Trust in a jurisdiction where there are no Avoidable Taxes. As used herein, an "Avoidable Tax" in respect of such Trust means a state or local tax: (i) upon (w) such Trust, (x) such Trust Property, (y) Certificateholders of the Trust or (z) the Trustee for which the Trustee is entitled to seek reimbursement from the Trust Property of such Trust, and (ii) which would be avoided if the Trustee were located in another state, or jurisdiction within a state, within the United States of America. A tax shall not be an Avoidable Tax in respect of any Trust if the Company or any Owner Trustee shall agree to pay, and shall pay, such tax. (f) If the Trustee shall resign, be removed or become incapable of acting as Trustee of the Trust or if a vacancy shall occur in the office of the Trustee of the Trust for any cause, the Company shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or other occurrence of such vacancy, a successor Trustee shall be appointed by Direction of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in such Trust delivered to the Company, the Owner Trustees, the Loan Trustee and the retiring Trustee, then the successor Trustee so appointed shall, with the approval of the Company of such appointment, which approval shall not be unreasonably withheld, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed as provided above. If no successor Trustee shall have been so appointed as provided above and accepted appointment in the manner hereinafter provided, the resigning Trustee or any Certificateholder who has been a bona fide Certificateholder of the related series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (g) The successor Trustee shall give notice of the resignation and removal of the Trustee and appointment of the successor Trustee by mailing written notice of such event by first-class mail, postage prepaid, to the Certificateholders as their names and addresses appear in the Register. Each notice shall include the name of such successor Trustee and the address of its Corporate Trust Office. 55 49 Section 7.10. Acceptance of Appointment by Successor. Every successor Trustee appointed hereunder shall execute and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Company or the successor Trustee, such retiring Trustee shall execute and deliver an instrument transferring to such successor Trustee all such rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all Trust Property held by such retiring Trustee, subject nevertheless to its lien, if any, provided for in Section 7.07. Upon request of any such successor Trustee, the Company, the retiring Trustee and such successor Trustee shall execute and deliver any and all instruments containing such provisions as shall be necessary or desirable to transfer and confirm to, and for more fully and certainly vesting in, such successor Trustee all such rights, powers and trusts. No institution shall accept its appointment as a Trustee hereunder unless at the time of such acceptance such institution shall be qualified and eligible under this Article VII. Section 7.11. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder; provided, however, that such corporation shall be otherwise qualified and eligible under this Article VII, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Certificates shall have been executed or authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such execution or authentication and deliver the Certificates so executed or authenticated with the same effect as if such successor Trustee had itself executed or authenticated such Certificates. Section 7.12. Maintenance of Agencies. (a) With respect to each series of Certificates, there shall at all times be maintained an office or agency in the location set forth in Section 12.04 where Certificates may be presented or surrendered for registration of transfer or for exchange, and for payment thereof, and where notices and demands, to or upon the Trustee in respect of such Certificates or this Agreement may be served; provided, however, that, if it shall be necessary that the Trustee maintain an office or agency in another location with respect to the Certificates (e.g., the Certificates shall be represented by Definitive Certificates and shall be listed on a national securities exchange), the Trustee will make all reasonable efforts to establish such an office or agency. Written notice of the location of each such other office or agency and of any change of location thereof shall be given by the Trustee to the Company, any Owner Trustees, the Loan Trustees (in the case of 56 50 any Owner Trustee or Loan Trustee, at its address specified in the Note Documents or such other address as may be notified to the Trustee) and the Certificateholders. In the event that no such office or agency shall be maintained or no such notice of location or of change of location shall be given, presentations and demands may be made and notices may be served at the Corporate Trust Office of the Trustee. (b) There shall at all times be a Registrar and a Paying Agent hereunder with respect to the Certificates. Each such Authorized Agent shall be a bank or trust company, shall be a corporation organized and doing business under the laws of the United States or any state, with a combined capital and surplus of at least $75,000,000, or a corporation having a combined capital and surplus in excess of $5,000,000, the obligations of which are guaranteed by a corporation organized and doing business under the laws of the United States or any state, with a combined capital and surplus of at least $75,000,000, and shall be authorized under such laws to exercise corporate trust powers, subject to supervision by federal or state authorities. The Trustee shall initially be the Paying Agent and, as provided in Section 3.04, Registrar hereunder with respect to the Certificates. Each Registrar shall furnish to the Trustee, at stated intervals of not more than six months, and at such other times as the Trustee may request in writing, a copy of the Register maintained by such Registrar. (c) Any corporation into which any Authorized Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which any Authorized Agent shall be a party, or any corporation succeeding to the corporate trust business of any Authorized Agent, shall be the successor of such Authorized Agent, if such successor corporation is otherwise eligible under this Section 7.12, without the execution or filing of any paper or any further act on the part of the parties hereto or such Authorized Agent or such successor corporation. (d) Any Authorized Agent may at any time resign by giving written notice of resignation to the Trustee, the Company, any Owner Trustees and the Loan Trustees. The Company may, and at the request of the Trustee shall, at any time terminate the agency of any Authorized Agent by giving written notice of termination to such Authorized Agent and to the Trustee. Upon the resignation or termination of an Authorized Agent or in case at any time any such Authorized Agent shall cease to be eligible under this Section 7.12 (when, in either case, no other Authorized Agent performing the functions of such Authorized Agent shall have been appointed), the Company shall promptly appoint one or more qualified successor Authorized Agents, reasonably satisfactory to the Trustee, to perform the functions of the Authorized Agent which has resigned or whose agency has been terminated or who shall have ceased to be eligible under this Section 7.12. The Company shall give written notice of any such appointment made by it to the Trustee, any Owner Trustees and the Loan Trustees; and in each case the Trustee shall mail notice of such appointment to all Certificateholders as their names and addresses appear on the Register for such series. 57 51 (e) The Company agrees to pay, or cause to be paid, from time to time to each Authorized Agent reasonable compensation for its services and to reimburse it for its reasonable expenses. Section 7.13. Money for Certificate Payments to Be Held in Trust. All moneys deposited with any Paying Agent for the purpose of any payment on Certificates shall be deposited and held in trust for the benefit of the Certificateholders entitled to such payment, subject to the provisions of this Section 7.13. Moneys so deposited and held in trust shall constitute a separate trust fund for the benefit of the Certificateholders with respect to which such money was deposited. The Trustee may at any time, for the purpose of obtaining the satisfaction and discharge of this Agreement or for any other purpose, direct any Paying Agent to pay to the Trustee all sums held in trust by such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Section 7.14. Registration of Equipment Notes in Trustee's Name. Subject to the provisions of any Intercreditor Agreement, the Trustee agrees that all Equipment Notes to be purchased by any Trust and Permitted Investments, if any, shall be issued in the name of the Trustee as trustee for the applicable Trust or its nominee and held by the Trustee in trust for the benefit of the Certificateholders, or, if not so held, the Trustee or its nominee shall be reflected as the owner of such Equipment Notes or Permitted Investments, as the case may be, in the register of the issuer of such Equipment Notes or Permitted Investments, as the case may be. Section 7.15. Representations and Warranties of Trustee. The Trustee hereby represents and warrants that: (a) the Trustee is a Delaware banking corporation organized and validly existing in good standing under the laws of the State of Delaware; (b) the Trustee has full power, authority and legal right to execute, deliver and perform this Agreement, the Escrow Agreement, the Intercreditor Agreement, the Note Documents and the Note Purchase Agreement and has taken all necessary action to authorize the execution, delivery and performance by it of this Agreement, the Escrow Agreement, the Intercreditor Agreement, the Note Documents and the Note Purchase Agreement; (c) the execution, delivery and performance by the Trustee of this Agreement, the Escrow Agreement, the Intercreditor Agreement, the Note Documents 58 52 and the Note Purchase Agreement (i) will not violate any provision of any United States federal law or the law of the state of the United States where it is located governing the banking and trust powers of the Trustee or any order, writ, judgment, or decree of any court, arbitrator or governmental authority applicable to the Trustee or any of its assets, (ii) will not violate any provision of the articles of association or by-laws of the Trustee, and (iii) will not violate any provision of, or constitute, with or without notice or lapse of time, a default under, or result in the creation or imposition of any lien on any properties included in the Trust Property pursuant to the provisions of any mortgage, indenture, contract, agreement or other undertaking to which it is a party, which violation, default or lien could reasonably be expected to have an adverse effect on the Trustee's performance or ability to perform its duties hereunder or thereunder or on the transactions contemplated herein or therein; (d) the execution, delivery and performance by the Trustee of this Agreement, the Escrow Agreement, the Intercreditor Agreement, the Note Documents and the Note Purchase Agreement will not require the authorization, consent, or approval of, the giving of notice to, the filing or registration with, or the taking of any other action in respect of, any governmental authority or agency of the United States or the state of the United States where it is located regulating the banking and corporate trust activities of the Trustee; and (e) this Agreement, the Escrow Agreement, the Intercreditor Agreement, the Note Documents and the Note Purchase Agreement have been duly executed and delivered by the Trustee and constitute the legal, valid and binding agreements of the Trustee, enforceable against it in accordance with their respective terms; provided, however, that enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and (ii) general principles of equity. Section 7.16. Withholding Taxes; Information Reporting. As to the Certificates, the Trustee, as trustee of the related grantor trust created by this Agreement, shall exclude and withhold from each distribution of principal, premium, if any, and interest and other amounts due under this Agreement or under the Certificates any and all withholding taxes applicable thereto as required by law. The Trustee agrees to act as such withholding agent and, in connection therewith, whenever any present or future taxes or similar charges are required to be withheld with respect to any amounts payable in respect of the Certificates, to withhold such amounts and timely pay the same to the appropriate authority in the name of and on behalf of the Certificateholders, that it will file any necessary withholding tax returns or statements when due, and that, as promptly as possible after the payment thereof, it will deliver to each such Certificateholder appropriate documentation showing the payment thereof, together with such additional documentary evidence as such 59 53 Certificateholders may reasonably request from time to time. The Trustee agrees to file any other information reports as it may be required to file under United States law. Section 7.17. Trustee's Liens. The Trustee in its individual capacity agrees that it will, in respect of each Trust created by this Agreement, at its own cost and expense promptly take any action as may be necessary to duly discharge and satisfy in full any mortgage, pledge, lien, charge, encumbrance, security interest or claim ("Trustee's Liens") on or with respect to the Trust Property of such Trust which is attributable to the Trustee either (i) in its individual capacity and which is unrelated to the transactions contemplated by this Agreement, the Intercreditor Agreement, the Note Purchase Agreement or the Note Documents or (ii) as Trustee hereunder or in its individual capacity and which arises out of acts or omissions which are not contemplated by this Agreement. Section 7.18. Preferential Collection of Claims. The Trustee shall comply with Section 311(a) of the Trust Indenture Act, excluding any creditor relationship listed in Section 311(b) of the Trust Indenture Act. If the Trustee shall resign or be removed as Trustee, it shall be subject to Section 311(a) of the Trust Indenture Act to the extent provided therein. ARTICLE VIII CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE Section 8.01. The Company to Furnish Trustee with Names and Addresses of Certificateholders. The Company will furnish to the Trustee within 15 days after each Record Date with respect to a Scheduled Payment, and at such other times as the Trustee may request in writing within 30 days after receipt by the Company of any such request, a list, in such form as the Trustee may reasonably require, of all information in the possession or control of the Company as to the names and addresses of the Certificateholders, in each case as of a date not more than 15 days prior to the time such list is furnished; provided, however, that so long as the Trustee is the sole Registrar, no such list need be furnished; and provided further, however, that no such list need be furnished for so long as a copy of the Register is being furnished to the Trustee pursuant to Section 7.12. Section 8.02. Preservation of Information; Communications to Certificateholders. The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Certificateholders contained in the most recent list furnished to the Trustee as provided in Section 7.12 or Section 8.01, as the case may be, and the names and addresses of Certificateholders of each series received by the Trustee in its capacity as Registrar, if so acting. The Trustee may destroy any list furnished to it as 60 54 provided in Section 7.12 or Section 8.01, as the case may be, upon receipt of a new list so furnished. Section 8.03. Reports by Trustee. Within 60 days after May 15 of each year commencing with the first full year following the issuance of any series of Certificates, the Trustee shall transmit to the Certificateholders, as provided in Section 313(c) of the Trust Indenture Act, a brief report dated as of such May 15, if required by Section 313(a) of the Trust Indenture Act. Section 8.04. Reports by the Company. The Company shall: (a) file with the Trustee, within 30 days after the Company is required to file the same with the SEC, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may from time to time by rules and regulations prescribe) which the Company is required to file with the SEC pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934, as amended; or, if the Company is not required to file information, documents or reports pursuant to either of such sections, then to file with the Trustee and the SEC, in accordance with rules and regulations prescribed by the SEC, such of the supplementary and periodic information, documents and reports which may be required pursuant to section 13 of the Securities Exchange Act of 1934, as amended, in respect of a security listed and registered on a national securities exchange as may be prescribed in such rules and regulations; (b) file with the Trustee and the SEC, in accordance with the rules and regulations prescribed by the SEC, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of the Company provided for in this Agreement, as may be required by such rules and regulations, including, in the case of annual reports, if required by such rules and regulations, certificates or opinions of independent public accountants, conforming to the requirements of Section 1.02; (c) transmit to all Certificateholders, in the manner and to the extent provided in Section 313(c) of the Trust Indenture Act such summaries of any information, documents and reports required to be filed by the Company pursuant to subsections (a) and (b) of this Section 8.04 as may be required by rules and regulations prescribed by the SEC; and (d) furnish to the Trustee, not less often than annually, a brief certificate from the principal executive officer, principal financial officer or principal accounting officer as to his knowledge of the Company's compliance with all conditions and covenants under this Agreement (it being understood that for purposes of this 61 55 paragraph (d), such compliance shall be determined without regard to any period of grace or requirement of notice provided under this Agreement). ARTICLE IX SUPPLEMENTAL AGREEMENTS Section 9.01. Supplemental Agreements Without Consent of Certificateholders. Without the consent of the Certificateholders, the Company may (but will not be required to), and the Trustee (subject to Section 9.03) shall, at the Company's request, at any time and from time to time, enter into one or more agreements supplemental hereto or to the Intercreditor Agreement, the Escrow Agreement, the Note Purchase Agreement, the Deposit Agreement or a Liquidity Facility, in form satisfactory to the Trustee, for any of the following purposes: (a) to provide for the formation of a Trust, the issuance of a series of Certificates and other matters contemplated by Section 2.01(b); or (b) to evidence the succession of another corporation to the Company and the assumption by any such successor of the covenants of the Company herein contained or of the Company's obligations under the Intercreditor Agreement, the Note Purchase Agreement, the Indemnity Agreement or any Liquidity Facility or to evidence the succession of another corporation to the Depositary or any Liquidity Provider and the assumption by any such successor of the obligations of the Depositary or such Liquidity Provider, as the case may be, under the Intercreditor Agreement, the Note Purchase Agreement, the Deposit Agreement, the Indemnity Agreement or any Liquidity Facility; or (c) to add to the covenants of the Company for the benefit of the Certificateholders, or to surrender any right or power conferred upon the Company in this Agreement, the Intercreditor Agreement, the Note Purchase Agreement or any Liquidity Facility; or (d) to correct or supplement any provision in this Agreement, the Intercreditor Agreement, the Escrow Agreement, the Note Purchase Agreement, the Deposit Agreement or any Liquidity Facility which may be defective or inconsistent with any other provision herein or therein or to cure any ambiguity or to modify any other provision with respect to matters or questions arising under this Agreement, the Intercreditor Agreement, the Escrow Agreement, the Note Purchase Agreement, the Deposit Agreement or any Liquidity Facility, provided, however, that any such action shall not materially adversely affect the interests of the Certificateholders; to correct 62 56 any mistake in this Agreement, the Intercreditor Agreement or any Liquidity Facility; or, as provided in the Intercreditor Agreement, to give effect to or provide for a Replacement Liquidity Facility (as defined in the Intercreditor Agreement); or (e) to comply with any requirement of the SEC, any applicable law, rules or regulations of any exchange or quotation system on which the Certificates are listed or of any regulatory body; or (f) to modify, eliminate or add to the provisions of this Agreement, the Intercreditor Agreement or any Liquidity Facility to such extent as shall be necessary to continue the qualification of this Agreement, the Intercreditor Agreement or any Liquidity Facility (including any supplemental agreement) under the Trust Indenture Act or under any similar Federal statute hereafter enacted, and to add to this Agreement, the Intercreditor Agreement or any Liquidity Facility such other provisions as may be expressly permitted by the Trust Indenture Act, excluding, however, the provisions referred to in Section 316(a)(2) of the Trust Indenture Act as in effect at the date as of which this Agreement was executed or any corresponding provision in any similar Federal statute hereafter enacted; or (g) to evidence and provide for the acceptance of appointment under this Agreement, the Intercreditor Agreement or any Liquidity Facility by a successor Trustee and to add to or change any of the provisions of this Agreement, the Intercreditor Agreement or any Liquidity Facility as shall be necessary to provide for or facilitate the administration of the Trust, pursuant to the requirements of Section 7.10; or (h) to provide the information required under Section 7.12 and Section 12.04 as to the Trustee; or (i) to make any other amendments or modifications hereto, provided, however, that such amendments or modifications shall apply to Certificates to be thereafter issued; provided, however, that no such supplemental agreement shall adversely affect the status of any Trust as a grantor trust under Subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as amended, for U.S. federal income tax purposes. Section 9.02. Supplemental Agreements with Consent of Certificateholders. With respect to the Trust and the Certificates, with the consent of the Certificateholders (including consents obtained in connection with a tender offer or exchange offer for the Certificates) evidencing Fractional Undivided Interests aggregating not less than a majority in 63 57 interest in such Trust, by Direction of said Certificateholders delivered to the Company and the Trustee, the Company may (with the consent of the Owner Trustees, if any, relating to the Certificates, which consent shall not be unreasonably withheld), but shall not be obligated to, and the Trustee (subject to Section 9.03) shall, enter into an agreement or agreements supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement, the Intercreditor Agreement, the Escrow Agreement, the Deposit Agreement, the Note Purchase Agreement or any Liquidity Facility to the extent applicable to such Certificateholders or of modifying in any manner the rights and obligations of such Certificateholders under this Agreement, the Intercreditor Agreement, the Escrow Agreement, the Deposit Agreement, the Note Purchase Agreement or any Liquidity Facility; provided, however, that no such agreement shall, without the consent of the Certificateholder of each Outstanding Certificate affected thereby: (a) reduce in any manner the amount of, or delay the timing of, any receipt by the Trustee of payments on the Equipment Notes held in such Trust or distributions that are required to be made herein on any Certificate, or change any date of payment on any Certificate, or change the place of payment where, or the coin or currency in which, any Certificate is payable, or impair the right to institute suit for the enforcement of any such payment or distribution on or after the Regular Distribution Date or Special Distribution Date applicable thereto; or (b) permit the disposition of any Equipment Note included in the Trust Property of such Trust except as permitted by this Agreement, or otherwise deprive such Certificateholder of the benefit of the ownership of the Equipment Notes in such Trust; or (c) alter the priority of distributions specified in the Intercreditor Agreement in a manner materially adverse to the interests of the Certificateholders; or (d) reduce the specified percentage of the aggregate Fractional Undivided Interests of such Trust that is required for any such supplemental agreement, or reduce such specified percentage required for any waiver (of compliance with certain provisions of this Agreement or certain defaults hereunder and their consequences) provided for in this Agreement; or (e) modify any of the provisions of this Section 9.02 or Section 6.05, except to increase any such percentage or to provide that certain other provisions of this Agreement cannot be modified or waived without the consent of the Certificateholder of each Certificate affected thereby; or 64 58 (f) adversely affect the status of any Trust as a grantor trust under Subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as amended, for U.S. federal income tax purposes. It shall not be necessary for any Direction of such Certificateholders under this Section 9.02 to approve the particular form of any proposed supplemental agreement, but it shall be sufficient if such Direction shall approve the substance thereof. Section 9.03. Documents Affecting Immunity or Indemnity. If in the opinion of the Trustee any document required to be executed by it pursuant to the terms of Section 9.01 or 9.02 affects any interest, right, duty, immunity or indemnity in favor of the Trustee under this Agreement or any Trust Supplement, the Trustee may in its discretion decline to execute such document. Section 9.04. Execution of Supplemental Agreements. In executing, or accepting the additional trusts created by, any supplemental agreement permitted by this Article or the modifications thereby of the trusts created by this Agreement, the Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental agreement is authorized or permitted by this Agreement. Section 9.05. Effect of Supplemental Agreements. Upon the execution of any agreement supplemental to this Agreement under this Article, this Agreement shall be modified in accordance therewith, and such supplemental agreement shall form a part of this Agreement for all purposes; and every Certificateholder theretofore or thereafter authenticated and delivered hereunder shall be bound thereby to the extent applicable to such series. Section 9.06. Conformity with Trust Indenture Act. Every supplemental agreement executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. Section 9.07. Reference in Certificates to Supplemental Agreements. Certificates authenticated and delivered after the execution of any supplemental agreement pursuant to this Article may bear a notation in form approved by the Trustee as to any matter provided for in such supplemental agreement; and, in such case, suitable notation may be made upon Outstanding Certificates after proper presentation and demand. 65 59 ARTICLE X AMENDMENTS TO INDENTURE AND NOTE DOCUMENTS Section 10.01. Amendments and Supplements to Indenture and Other Note Documents. In the event that the Trustee, as holder (or beneficial owner through the Subordination Agent) of any Equipment Notes (or as a prospective purchaser of any Postponed Notes) in trust for the benefit of the Certificateholders or as Controlling Party under an Intercreditor Agreement, receives (directly or indirectly through the Subordination Agent) a request for a consent to any amendment, modification, waiver or supplement under any Indenture, other Note Document or any other related document, which request would require the consent of Certificateholders under Section 9.02 hereof, the Trustee shall forthwith send a notice of such proposed amendment, modification, waiver or supplement to each Certificateholder registered on the Register as of the date of such notice. The Trustee shall request from the Certificateholders a Direction as to (a) whether or not to take or refrain from taking (or direct the Subordination Agent to take or refrain from taking) any action which a holder of (or, with respect to Postponed Notes, a prospective purchaser of) such Equipment Note or a Controlling Party has the option to direct, (b) whether or not to give or execute (or direct the Subordination Agent to give or execute) any waivers, consents, amendments, modifications or supplements as a holder of (or, with respect to Postponed Notes, a prospective purchaser of) such Equipment Note or as Controlling Party and (c) how to vote (or direct the Subordination Agent to vote) any Equipment Note (or, with respect to a Postponed Note, its commitment to acquire such Postponed Note) if a vote has been called for with respect thereto. Provided such a request for Certificateholder Direction shall have been made, in directing any action or casting any vote or giving any consent as the holder of any Equipment Note (or in directing the Subordination Agent in any of the foregoing), (i) other than as Controlling Party, the Trustee shall vote for or give consent to any such action with respect to such Equipment Note (or Postponed Note) in the same proportion as that of (A) the aggregate face amounts of all Certificates actually voted in favor of or for giving consent to such action by such Direction of Certificateholders to (B) the aggregate face amount of all Outstanding Certificates and (ii) as Controlling Party, the Trustee shall vote as directed in such Certificateholder Direction by the Certificateholders evidencing a Fractional Undivided Interest aggregating not less than a majority in interest in the Trust. For purposes of the immediately preceding sentence, a Certificate shall have been "actually voted" if the Holder of such Certificate has delivered to the Trustee an instrument evidencing such Holder's consent to such Direction prior to one Business Day before the Trustee directs such action or casts such vote or gives such consent. Notwithstanding the foregoing, but subject to Section 6.04 and any Intercreditor Agreement, the Trustee may, with respect to the Certificates, in its own discretion and at its own direction, consent and notify the relevant Loan Trustee of such consent (or direct the Subordination Agent to consent and notify the Loan Trustee of such consent) to any amendment, modification, waiver or supplement under any related Indenture or any other related Note Document if an Event of Default hereunder 66 60 shall have occurred and be continuing or if such amendment, modification, waiver or supplement will not materially adversely affect the interests of the Certificateholders. ARTICLE XI TERMINATION OF TRUSTS Section 11.01. Termination of the Trust. The respective obligations and responsibilities of the Company and the Trustee shall terminate upon the earlier of (A) the completion of the assignment, transfer and discharge described in the first sentence of the immediately following paragraph and (B) distribution to all Certificateholders and the Trustee of all amounts required to be distributed to them pursuant to this Agreement and the disposition of all property held as part of the Trust Property; provided, however, that in no event shall the Trust continue beyond one hundred ten (110) years following the date of the execution of this Agreement. Upon the earlier of (i) the first Business Day following June 30, 1999, or, if later, the fifth Business Day following the Delivery Period Termination Date and (ii) the fifth Business Day following the date on which a Triggering Event occurs (such date, the "Transfer Date"), or, if later, the date on which all of the conditions set forth in the immediately following sentence have been satisfied, the Trustee is hereby directed (subject only to the immediately following sentence) to, and the Company shall direct the institution that will serve as the Related Trustee under the Related Pass Through Trust Agreement to, execute and deliver the Assignment and Assumption Agreement, pursuant to which the Trustee shall assign, transfer and deliver all of the Trustee's right, title and interest to the Trust Property to the Related Trustee under the Related Pass Through Trust Agreement. The Trustee and the Related Trustee shall execute and deliver the Assignment and Assumption Agreement upon the satisfaction of the following conditions: (i) The Trustee, the Related Trustee and each of the Rating Agencies then rating the Certificates shall have received an Officer's Certificate and an Opinion of Counsel dated the date of the Assignment and Assumption Agreement and each satisfying the requirements of Section 1.02, which Opinion of Counsel shall be substantially to the effect set forth below and may be relied upon by the Beneficiaries (as defined in the Assignment and Assumption Agreement): (a) upon the execution and delivery thereof by the parties thereto in accordance with the terms of this Agreement and the Related Pass Through Trust Agreement, the Assignment and Assumption Agreement will constitute the valid and binding obligation of each of the parties thereto enforceable against each such party in accordance with its terms; 67 61 (b) upon the execution and delivery of the Assignment and Assumption Agreement in accordance with the terms of this Agreement and the Related Pass Through Trust Agreement, each of the Certificates then Outstanding will be entitled to the benefits of the Related Pass Through Trust Agreement; (c) the Related Trust is not required to be registered as an investment company under the Investment Company Act of 1940, as amended; (d) the Related Pass Through Trust Agreement constitutes the valid and binding obligation of the Company enforceable against the Company in accordance with its terms; and (e) neither the execution and delivery of the Assignment and Assumption Agreement in accordance with the terms of this Agreement and the Related Pass Through Trust Agreement, nor the consummation by the parties thereto of the transactions contemplated to be consummated thereunder on the date thereof, will violate any law or governmental rule or regulation of the State of New York or the United States of America known to such counsel to be applicable to the transactions contemplated by the Assignment and Assumption Agreement. (ii) The Trustee and the Company shall have received (x) a copy of the articles of incorporation and bylaws of the Related Trustee certified as of the Transfer Date by the Secretary or Assistant Secretary of such institution and (y) a copy of the filing (including all attachments thereto) made by the institution serving as the Related Trustee with the Office of the Superintendent, State of New York Banking Department for the qualification of the Related Trustee under Section 131(3) of the New York Banking Law. Upon the execution of the Assignment and Assumption Agreement by the parties thereto, the Trust shall be terminated, the Certificateholders shall receive beneficial interests in the Related Trust in exchange for their interests in the Trust equal to their respective beneficial interests in the Trust, and the Outstanding Certificates representing Fractional Undivided Interests in the Trust shall be deemed for all purposes of this Agreement and the Related Pass Through Trust Agreement, without further signature or action of any party or Certificateholder, to be certificates representing the same fractional undivided interests in the Related Trust and its trust property. By acceptance of its Certificate, each Certificateholder consents to such assignment, transfer and delivery of the Trust Property to the trustee of the Related Trust upon the execution and delivery of the Assignment and Assumption Agreement. 68 62 In connection with the occurrence of the event set forth in clause (B) above, notice of such termination, specifying the Distribution Date upon which the Certificateholders may surrender their Certificates to the Trustee for payment of the final distribution and cancellation, shall be mailed promptly by the Trustee to Certificateholders not earlier than the 60th day and not later than the 15th day next preceding such final Distribution Date specifying (A) the Distribution Date upon which the proposed final payment of the Certificates will be made upon presentation and surrender of Certificates at the office or agency of the Trustee therein specified, (B) the amount of any such proposed final payment, and (c) that the Record Date otherwise applicable to such Distribution Date is not applicable, payments being made only upon presentation and surrender of the Certificates at the office or agency of the Trustee therein specified. The Trustee shall give such notice to the Registrar at the time such notice is given to Certificateholders. Upon presentation and surrender of the Certificates in accordance with such notice, the Trustee shall cause to be distributed to Certificateholders such final payments. In the event that all of the Certificateholders shall not surrender their Certificates for cancellation within six months after the date specified in the above-mentioned written notice, the Trustee shall give a second written notice to the remaining Certificateholders to surrender their Certificates for cancellation and receive the final distribution with respect thereto. No additional interest shall accrue on the Certificates after the Distribution Date specified in the first written notice. In the event that any money held by the Trustee for the payment of distributions on the Certificates shall remain unclaimed for two years (or such lesser time as the Trustee shall be satisfied, after sixty days' notice from the Company, is one month prior to the escheat period provided under applicable law) after the final distribution date with respect thereto, the Trustee shall pay to each Loan Trustee the appropriate amount of money relating to such Loan Trustee and shall give written notice thereof to the related Owner Trustees, the Owner Participants and the Company. ARTICLE XII MISCELLANEOUS PROVISIONS Section 12.01. Limitation on Rights of Certificateholders. The death or incapacity of any Certificateholder shall not operate to terminate this Agreement or the Trust, nor entitle such Certificateholder's legal representatives or heirs to claim an accounting or to take any action or commence any proceeding in any court for a partition or winding up of the Trust, nor otherwise affect the rights, obligations, and liabilities of the parties hereto or any of them. Section 12.02. Liabilities of Certificateholders. Neither the existence of the Trust nor any provision in this Agreement is intended to or shall limit the liability the 69 63 Certificateholders would otherwise incur if the Certificateholders owned Trust Property as co-owners, or incurred any obligations of the Trust, directly rather than through the Trust. Section 12.03. Registration of Equipment Notes in Name of Subordination Agent. If the Trust is party to the Intercreditor Agreement, the Trustee agrees that all Equipment Notes to be purchased by such Trust shall be issued in the name of the Subordination Agent under the Intercreditor Agreement or its nominee and held by such Subordination Agent in trust for the benefit of the Certificateholders, or, if not so held, such Subordination Agent or its nominee shall be reflected as the owner of such Equipment Notes in the register of the issuer of such Equipment Notes. Section 12.04. Notices. (a) Unless otherwise specifically provided herein, all notices required under the terms and provisions of this Agreement shall be in English and in writing, and any such notice may be given by United States mail, courier service or telecopy, and any such notice shall be effective when delivered or received or, if mailed, three days after deposit in the United States mail with proper postage for ordinary mail prepaid, (i) if to the Company: Atlas Air, Inc. 538 Commons Drive Golden, CO 80401 Attention: Chief Financial Officer Facsimile: (303) 526-5051 (ii) if to the Trustee: Wilmington Trust Company One Rodney Square 1100 N. Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Department Facsimile: (302) 651-8882 (b) The Company or the Trustee, by notice to the other, may designate additional or different addresses for subsequent notices or communications. (c) Any notice or communication to Certificateholders shall be mailed by first-class mail to the addresses for Certificateholders shown on the Register kept by the Registrar and to addresses filed with the Trustee for Certificate Owners. Failure so to mail a notice or communication or any defect in such notice or communication shall not affect its sufficiency with respect to other Certificateholders or Certificate Owners. 70 64 (d) If a notice or communication is mailed in the manner provided above within the time prescribed, it is conclusively presumed to have been duly given, whether or not the addressee receives it. (e) If the Company mails a notice or communication to the Certificateholders, it shall mail a copy to the Trustee and to each Paying Agent for such series at the same time. (f) Notwithstanding the foregoing, all communications or notices to the Trustee shall be deemed to be given only when received by a Responsible Officer of the Trustee. (g) The Trustee shall promptly furnish the Company with a copy of any demand, notice or written communication received by the Trustee hereunder from any Certificateholder, Owner Trustee or Loan Trustee. Section 12.05. Governing Law. THIS AGREEMENT HAS BEEN DELIVERED IN THE STATE OF DELAWARE AND, TOGETHER WITH THE CERTIFICATES, SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. Section 12.06. Severability of Provisions. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions, or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement or the Trust, or of the Certificates or the rights of the Certificateholders thereof. Section 12.07. Trust Indenture Act Controls. Upon the occurrence of any Registration Event, this Agreement shall become subject to the provisions of the Trust Indenture Act and shall, to the extent applicable, be governed by such provisions. From and after any Registration Event, if any provision of this Agreement limits, qualifies or conflicts with another provision which is required to be included in this Agreement by the Trust Indenture Act, the required provision shall control. Section 12.08. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. 71 65 Section 12.09. Successors and Assigns. All covenants, agreements, representations and warranties in this Agreement by the Trustee and the Company shall bind and, to the extent permitted hereby, shall inure to the benefit of and be enforceable by their respective successors and assigns, whether so expressed or not. Section 12.10. Benefits of Agreement. Nothing in this Agreement or in the Certificates, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, and the Certificateholders, any benefit or any legal or equitable right, remedy or claim under this Agreement. Section 12.11. Legal Holidays. In any case where any Regular Distribution Date or Special Distribution Date relating to any Certificate shall not be a Business Day, then (notwithstanding any other provision of this Agreement) payment need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on such Regular Distribution Date or Special Distribution Date, and no interest shall accrue during the intervening period. Section 12.12. Counterparts. For the purpose of facilitating the execution of this Agreement and for other purposes, this Agreement may be executed simultaneously in any number of counterparts, each of which counterparts shall be deemed to be an original, and all of which counterparts shall constitute but one and the same instrument. Section 12.13. Communication by Certificateholders with Other Certificateholders. Certificateholders may communicate with other Certificateholders with respect to their rights under this Agreement or the Certificates pursuant to Section 312(b) of the Trust Indenture Act. The Company, the Trustee and any and all other persons benefitted by this Agreement shall have the protection afforded by Section 312(c) of the Trust Indenture Act. Section 12.14. Intention of Parties. The parties hereto intend that each Trust be classified for U.S. federal income tax purposes as a grantor trust under Subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as amended, and not as a trust or association taxable as a corporation or as a partnership. The Trustee agrees to hold all assets of each Trust for investment purposes only. Each Certificateholder and Investor, by its acceptance of its Certificate or a beneficial interest therein, agrees to treat the Trust as a grantor trust for all U.S. federal, state and local income tax purposes. The powers granted and obligations undertaken pursuant to this Agreement shall be so construed so as to further such intent. 72 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed by their respective officers hereunto duly authorized as of the day and year first written above. ATLAS AIR, INC. By: /s/ RICHARD H. SHUYLER ------------------------------------ Name: Richard H. Shuyler Title: Chief Financial Officer, Sr. Vice Pres., Finance; and Corporate Treasurer WILMINGTON TRUST COMPANY, as Trustee By: /s/ JAMES. P. LAWLER ------------------------------------ Name: JAMES P. LAWLER Title: Vice President 73 EXHIBIT A FORM OF CERTIFICATE REGISTERED No. ______________ [THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS CERTIFICATE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT; (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFICATE WAS HELD BY ATLAS AIR, INC., THE TRUSTEE OR ANY AFFILIATE OF ANY OF SUCH PERSONS RESELL OR OTHERWISE TRANSFER THIS CERTIFICATE EXCEPT (A) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (B) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING $100,000 OR MORE AGGREGATE PRINCIPAL AMOUNT OF SUCH CERTIFICATE THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS CERTIFICATE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES 74 A-2 ACT (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT; AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS CERTIFICATE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS CERTIFICATE WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFICATE WAS HELD BY ATLAS AIR, INC., THE TRUSTEE OR ANY AFFILIATE OF ANY OF SUCH PERSONS THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE PASS THROUGH TRUST AGREEMENT CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS CERTIFICATE IN VIOLATION OF THE FOREGOING RESTRICTIONS.]* [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. - --------------------- * Not to be included on the face of the Permanent Offshore Global Certificate. 75 A-3 TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE PASS THROUGH TRUST AGREEMENT REFERRED TO HEREIN.* [BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT EITHER (A) NO PLAN ASSETS HAVE BEEN USED TO PURCHASE THIS CERTIFICATE OR (B) THE PURCHASE AND HOLDING OF THIS CERTIFICATE ARE EXEMPT FROM THE PROHIBITED TRANSACTION RESTRICTIONS OF ERISA AND THE CODE PURSUANT TO ONE OR MORE PROHIBITED TRANSACTION STATUTORY OR ADMINISTRATIVE EXEMPTIONS.] - --------------------- * To be included on the face of each Global Certificate. 76 A-4 [GLOBAL CERTIFICATE]* ATLAS AIR 1998-1A PASS THROUGH TRUST 7.38% Atlas Air [Initial] [Exchange] Pass Through Certificate Series 1998-1A Final Distribution Date: January 2, 2018 evidencing a fractional undivided interest in a trust, the property of which includes certain equipment notes each secured by an Aircraft leased to Atlas Air, Inc. $____________ Fractional Undivided Interest representing .________% of the Trust per $1,000 face amount THIS CERTIFIES THAT ______________________, for value received, is the registered owner of a $__________ _ (________________ dollars) Fractional Undivided Interest in the Atlas Air 1998-1A Pass Through Trust (the "Trust") created pursuant to a Pass Through Trust Agreement, dated as of February 9, 1998 (the "Agreement"), between Wilmington Trust Company (the "Trustee") and Atlas Air, Inc., a corporation incorporated under Delaware law (the "Company"), a summary of certain of the pertinent provisions of which is set forth below. To the extent not otherwise defined herein, the capitalized terms used herein have the meanings assigned to them in the Agreement. This Certificate is one of the duly authorized Certificates designated as "7.38% Atlas Air [Initial] [Exchange] Pass Through Certificates Series 1998- 1A" (herein called the "Certificates"). This Certificate is issued under and is subject to the terms, provisions, and conditions of the Agreement. By virtue of its acceptance hereof the Certificateholder of this Certificate assents to and agrees to be bound by the provisions of the Agreement and the Intercreditor Agreement. The property of the Trust includes certain Equipment Notes and all rights of the Trust to receive payments under the Intercreditor Agreement and the Liquidity Facilities (the "Trust Property"). Each issue of the Equipment Notes is secured by, among other things, a security interest in the Aircraft leased to or owned by the Company. The Certificates represent fractional undivided interests in the Trust and the Trust Property, and have no rights, benefits or interest in respect of any assets or property other than the Trust Property. Subject to and in accordance with the terms of the Agreement and the Intercreditor Agreement, from and to the extent of funds then available to the Trustee, there - --------------------- * To be included on the face of each Global Certificate. 77 A-5 will be distributed on each January 2 and July 2 (a "Regular Distribution Date"), commencing on July 2, 1998, to the Person in whose name this Certificate is registered at the close of business on the 15th day preceding the Regular Distribution Date, an amount in respect of the Scheduled Payments on the Equipment Notes due on such Regular Distribution Date, the receipt of which has been confirmed by the Trustee, equal to the product of the percentage interest in the Trust evidenced by this Certificate and an amount equal to the sum of such Scheduled Payments. Subject to and in accordance with the terms of the Agreement and the Intercreditor Agreement, in the event that Special Payments on the Equipment Notes are received by the Trustee, from funds then available to the Trustee, there shall be distributed on the applicable Special Distribution Date, to the Person in whose name this Certificate is registered at the close of business on the 15th day preceding the Special Distribution Date, an amount in respect of such Special Payments on the Equipment Notes, the receipt of which has been confirmed by the Trustee, equal to the product of the percentage interest in the Trust evidenced by this Certificate and an amount equal to the sum of such Special Payments so received. If a Regular Distribution Date or Special Distribution Date is not a Business Day, distribution shall be made on the immediately following Business Day with the same force and effect as if made on such Regular Distribution Date or Special Distribution Date and no interest shall accrue during the intervening period. The Trustee shall mail notice of each Special Payment and the Special Distribution Date therefor to the Certificateholder of this Certificate. [The Holder of this Certificate is entitled to the benefits of the Registration Rights Agreement, dated as of February 9, 1998, among the Company, the Trustee and the Placement Agents named therein (the "Registration Rights Agreement"). In the event that neither the consummation of the Exchange Offer nor the declaration by the Commission of a Shelf Registration to be effective (a "Registration Event") occurs on or prior to the 180th day after the date of the issuance of the Certificates, the interest rate per annum borne by the Equipment Notes shall be increased by 0.50%, from and including August 9, 1998, to but excluding the date on which a Registration Event occurs. In the event that the Shelf Registration Statement ceases to be effective at any time during the period specified by the Registration Rights Agreement for more than 60 days, whether or not consecutive, during any 12-month period, the interest rate per annum borne by the Equipment Notes shall be increased by 0.50% from the 61st day of the applicable 12-month period such Shelf Registration Statement ceases to be effective until such time as the Shelf Registration Statement again becomes effective.]* Except as otherwise provided in the Agreement and notwithstanding the above, the final distribution on this Certificate will be made after notice mailed by the Trustee of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Trustee specified in such notice. - --------------------- * To be included only on each Initial Certificate. 78 A-6 THE AGREEMENT AND THIS CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed. Dated: [__________ __], 1998 ATLAS AIR 1998-1A PASS THROUGH TRUST By: WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Trustee Attest: By: ------------------------- Name: Title: - -------------------- Authorized Signature 79 A-7 [FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Certificates referred to in the within-mentioned Agreement. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Trustee By: ------------------------------ Authorized Officer 80 A-8 [REVERSE OF CERTIFICATE] The Certificates do not represent a direct obligation of, or an obligation guaranteed by, or an interest in, the Company or the Trustee or any of their affiliates. The Certificates are limited in right of payment, all as more specifically set forth on the face hereof and in the Agreement. All payments or distributions made to Certificateholders under the Agreement shall be made only from the Trust Property and only to the extent that the Trustee shall have sufficient income or proceeds from the Trust Property to make such payments in accordance with the terms of the Agreement. Each Certificateholder of this Certificate, by its acceptance hereof, agrees that it will look solely to the income and proceeds from the Trust Property to the extent available for distribution to such Certificateholder as provided in the Agreement. This Certificate does not purport to summarize the Agreement and reference is made to the Agreement for information with respect to the interests, rights, benefits, obligations, proceeds, and duties evidenced hereby. A copy of the Agreement may be examined during normal business hours at the principal office of the Trustee, and at such other places, if any, designated by the Trustee, by any Certificateholder upon request. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Certificateholders under the Agreement at any time by the Company and the Trustee with the consent of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust. Any such consent by the Certificateholder of this Certificate shall be conclusive and binding on such Certificateholder and upon all future Certificateholders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Certificateholders of any of the Certificates. As provided in the Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registrable in the Register upon surrender of this Certificate for registration of transfer at the offices or agencies maintained by the Trustee in its capacity as Registrar, or by any successor Registrar, in the Borough of Manhattan, the City of New York, duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Trustee and the Registrar duly executed by the Certificateholder hereof or such Certificateholder's attorney duly authorized in writing, and thereupon one or more new Certificates of authorized denominations evidencing the same aggregate Fractional Undivided Interest in the Trust will be issued to the designated transferee or transferees. 81 A-9 The Certificates are issuable only as registered Certificates without coupons in minimum denominations of [$100,000]* [$1,000]** Fractional Undivided Interest and integral multiples of $1,000 in excess thereof [except that one Certificate may be in a denomination of less than $100,000]*. As provided in the Agreement and subject to certain limitations therein set forth, the Certificates are exchangeable for new Certificates of authorized denominations evidencing the same aggregate Fractional Undivided Interest in the Trust, as requested by the Certificateholder surrendering the same. No service charge will be made for any such registration of transfer or exchange, but the Trustee shall require payment by the Holder of a sum sufficient to cover any tax or governmental charge payable in connection therewith. The Trustee, the Registrar, and any agent of the Trustee or the Registrar may treat the person in whose name this Certificate is registered as the owner hereof for all purposes, and neither the Trustee, the Registrar, nor any such agent shall be affected by any notice to the contrary. The obligations and responsibilities created by the Agreement and the Trust created thereby shall terminate upon the distribution to Certificateholders of all amounts required to be distributed to them pursuant to the Agreement and the disposition of all property held as part of the Trust Property. - ------------------------- * To be included only on each Initial Certificate. ** To be included only on each Exchange Certificate. 82 A-10 FORM OF TRANSFER NOTICE FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s) and transfer(s) unto Insert Taxpayer Identification No. - ------------------------- - ------------------------- please print or typewrite name and address including zip code of assignee - ------------------------- the within Certificate and all rights thereunder, hereby irrevocably constituting and appointing - ------------------------- attorney to transfer said Certificate on the books of the Trustee with full power of substitution in the premises. [THE FOLLOWING PROVISION TO BE INCLUDED ON ALL CERTIFICATES EXCEPT PERMANENT OFFSHORE GLOBAL AND OFFSHORE PHYSICAL CERTIFICATES] In connection with any transfer of this Certificate occurring prior to the date that is the earlier of the date of an effective Registration Statement or February 9, 2000, the undersigned confirms that without utilizing any general solicitation or general advertising that: [Check One] [ ] (a) this Certificate is being transferred in compliance with the exemption from registration under the Securities Act of 1933, as amended, provided by Rule 144A thereunder. or [ ] (b) this Certificate is being transferred other than in accordance with (a) above and documents are being furnished that comply with the conditions of transfer set forth in this Certificate and the Agreement. If neither of the foregoing boxes is checked, the Trustee or other Registrar shall not be obligated to register this Certificate in the name of any Person other than the Holder hereof 83 A-11 unless and until the conditions to any such transfer of registration set forth herein and in Section 3.06 of the Agreement shall have been satisfied. Date: [Name of Transferor] --------------------- ------------------------------------------ NOTE: The signature must correspond with the name as written upon the face of the within-mentioned instrument in every particular, without alteration or any change whatsoever. Signature Guarantee: ---------------------- TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Certificate for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, as amended, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: ------------------------- --------------------------------- NOTE: To be executed by an executive officer. 84 EXHIBIT B FORM OF CERTIFICATE FOR UNLEGENDED CERTIFICATES [DATE] Wilmington Trust Company One Rodney Square 1100 N. Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Re: Atlas Air 1998-1A Pass Through Trust, Class A Pass Through Trust Certificates (the "Certificates") Dear Sirs: This letter relates to U.S. $__________ Fractional Undivided Interest of Certificates represented by a Certificate (the "Legended Certificate") which bears a legend outlining restrictions upon transfer of such Legended Certificate. Pursuant to Section 3.01 of the Pass Through Trust Agreement relating to the Certificates dated as of February 9, 1998 (the "Trust Agreement"), between Atlas Air, Inc. ("Atlas") and you, we hereby certify that we are (or we will hold such securities on behalf of) a person outside the United States to whom the Certificates could be transferred in accordance with Rule 904 of Regulation S promulgated under the U.S. Securities Act of 1933, as amended. Accordingly, you are hereby requested to exchange the legended certificate for an unlegended certificate representing an identical principal amount of Certificates, all in the manner provided for in the Trust Agreement. You and Atlas are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Certificateholder] By: -------------------------------- Authorized Signature 85 EXHIBIT C FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S [DATE] Wilmington Trust Company One Rodney Square 1100 N. Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Re: Atlas Air 1998-1A Pass Through Trust (the "Trust"), 7.38% Atlas Air Pass Through Certificates Series 1998-1A (the "Certificates") Sirs: In connection with our proposed sale of $_______ Fractional Undivided Interest of the Certificates, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the Securities Act of 1933, as amended, and, accordingly, we represent that: (1) the offer of the Certificates was not made to a person in the United States; (2) either (a) at the time the buy order was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States or (b) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been pre- arranged with a buyer in the United States; (3) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; and 86 C-2 (4) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act. In addition, if the sale is made during a restricted period and the provisions of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are applicable thereto, we confirm that such sale has been made in accordance with the applicable provisions of Rule 903(c)(3) or Rule 904(c)(1), as the case may be. You and Atlas Air, Inc. are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Transferor] By: -------------------------------- Authorized Signature 87 EXHIBIT D FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS TO NON-QIB ACCREDITED INVESTORS [DATE] Wilmington Trust Company One Rodney Square 1100 N. Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Re: Atlas Air 1998-1A Pass-Through Trust (the "Trust"), 7.38% Atlas Air Pass Through Certificates Series 1998-1A (the "Certificates") Dear Sirs: In connection with our proposed purchase of $_______________ aggregate principal amount of the Certificates, we confirm that: 1. We understand that any subsequent transfer of the Certificates is subject to certain restrictions and conditions set forth in the Pass Through Trust Agreement dated as of February 9, 1998 relating to the Certificates (the "Pass Through Trust Agreement") and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Certificates except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the "Securities Act"). 2. We understand that the Certificates have not been registered under the Securities Act, and that the Certificates may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell any Certificate, we will do so only (A) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (B) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes to you and Continental Airlines, Inc., a signed letter substantially in the form of this letter, (C) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (D) pursuant to the exemption from registration provided by Rule 144 under the Securities Act, or (E) pursuant to an effective registration statement under 88 D-2 the Securities Act, and we further agree to provide to any person purchasing any of the Certificates from us a notice advising such purchaser that resales of the Notes are restricted as stated herein. We further understand that the Certificates purchased by us will bear a legend to the foregoing effect. 3. We understand that, on any proposed resale of any Certificates, we will be required to furnish to you and Atlas Air, Inc. such certifications, legal opinions and other information as you and Atlas Air, Inc. may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Certificates purchased by us will bear a legend to the foregoing effect. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Certificates and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Certificates purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You and Atlas Air, Inc. are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Very truly yours, [Name of Transferor] By: ----------------------------- Authorized Signature 89 EXHIBIT E FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT Atlas Air Pass Through Trust 1998-1A ASSIGNMENT AND ASSUMPTION AGREEMENT, dated ____________, 199_ (the "Assignment Agreement"), between Wilmington Trust Company, a Delaware banking corporation ("WTC"), not in its individual capacity except as expressly provided herein, but solely as trustee under the Pass Through Trust Agreement dated as of February 9, 1998 (as amended or modified from time to time, the "Agreement"), in respect of the Atlas Air Pass Through Trust 1998-1A-O (the "Assignor"), and Wilmington Trust Company, a Delaware banking corporation, not in its individual capacity except as expressly provided herein, but solely as trustee under the Pass Through Trust Agreement dated as of February 9, 1998 (as amended or modified from time to time, the "New Agreement"), in respect of the Atlas Air Pass Through Trust 1998-1A-S (the "Assignee"). W I T N E S S E T H: WHEREAS, the parties hereto desire to effect on the date hereof (the "Transfer Date") (a) the transfer by the Assignor to the Assignee of all of the right, title and interest of the Assignor in, under and with respect to, among other things, the Trust Property and each of the documents listed in Schedule I hereto (the "Scheduled Documents") and (b) the assumption by the Assignee of the obligations of the Assignor (i) under the Scheduled Documents and (ii) in respect of the Applicable Certificates issued under the Agreement; and WHEREAS, the Scheduled Documents permit such transfer upon satisfaction of certain conditions heretofore or concurrently herewith being complied with; NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements herein contained, the parties hereto do hereby agree as follows (capitalized terms used herein without definition having the meaning ascribed thereto in the Agreement): 1. Assignment. The Assignor does hereby sell, assign, convey, transfer and set over unto the Assignee as of the Transfer Date all of its present and future right, title and interest in, under and with respect to the Trust Property and the Scheduled Documents and each other contract, agreement, document or instrument relating to the Trust Property or the Scheduled Documents (such other contracts, agreements, documents or instruments, together with the Scheduled Documents, to be referred to as the "Assigned Documents"), and any proceeds therefrom, together with all documents and instruments evidencing any of such right, title and interest. 90 E-2 2. Assumption. The Assignee hereby assumes for the benefit of the Assignor and each of the parties listed in Schedule II hereto (collectively, the "Beneficiaries") all of the duties and obligations of the Assignor, whenever accrued, pursuant to the Assigned Documents and hereby confirms that it shall be deemed a party to each of the Assigned Documents to which the Assignor is a party and shall be bound by all the terms thereof (including the agreements and obligations of the Assignor set forth therein) as if therein named as the Assignor. Further, the Assignee hereby assumes for the benefit of the Assignor and the Beneficiaries all of the duties and obligations of the Assignor under the Outstanding Applicable Certificates and hereby confirms that the Applicable Certificates representing Fractional Undivided Interests under the Agreement shall be deemed for all purposes of the Agreement and the New Agreement to be certificates representing the same fractional undivided interests under the New Agreement equal to their respective beneficial interests in the trust created under the Agreement. 3. Effectiveness. This Assignment Agreement shall be effective upon the execution and delivery hereof by the parties hereto, and each Applicable Certificateholder, by its acceptance of its Applicable Certificate or a beneficial interest therein, agrees to be bound by the terms of this Assignment Agreement. 4. Payments. The Assignor hereby covenants and agrees to pay over to the Assignee, if and when received following the Transfer Date, any amounts (including any sums payable as interest in respect thereof) paid to or for the benefit of the Assignor that, under Section 1 hereof, belong to the Assignee. 5. Further Assurances. The Assignor shall, at any time and from time to time, upon the request of the Assignee, promptly and duly execute and deliver any and all such further instruments and documents and take such further action as the Assignee may reasonably request to obtain the full benefits of this Assignment Agreement and of the right and powers herein granted. The Assignor agrees to deliver any Applicable Certificates, and all Trust Property, if any, then in the physical possession of the Assignor, to the Assignee. 6. Representations and Warranties. (a) The Assignee represents and warrants to the Assignor and each of the Beneficiaries that: (i) it has all requisite power and authority and legal right to enter into and carry out the transactions contemplated hereby and to carry out and perform the obligations of the "Pass Through Trustee" under the Assigned Documents; (ii) on and as of the date hereof, the representations and warranties of the Assignee set forth in Section 7.15 of the Agreement and Section 7.15 of the New Agreement are true and correct. 91 E-3 (b) The Assignor represents and warrants to the Assignee that: (i) it is duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has the full trust power, authority and legal right under the laws of the State of Delaware and the United States pertaining to its trust and fiduciary powers to execute and deliver this Assignment Agreement; (ii) the execution and delivery by it of this Assignment Agreement and the performance by it of its obligations hereunder have been duly authorized by it and will not violate its articles of association or by-laws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it is bound; and (iii) this Assignment Agreement constitutes the legal, valid and binding obligations of it enforceable against it in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity, whether considered in a proceeding at law or in equity. 7. GOVERNING LAW. THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK INCLUDING MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. 8. Counterparts. This Assignment Agreement may be executed in any number of counterparts, all of which together shall constitute a single instrument. It shall not be necessary that any counterpart be signed by both parties so long as each party shall sign at least one counterpart. 9. Third Party Beneficiaries. The Assignee hereby agrees, for the benefit of the Beneficiaries, that its representations, warranties and covenants contained herein are also intended to be for the benefit of each Beneficiary, and each Beneficiary shall be deemed to be an express third party beneficiary with respect thereto, entitled to enforce directly and in its own name any rights or claims it may have against such party as such beneficiary. 92 E-4 IN WITNESS WHEREOF, the parties hereto, through their respective officers thereunto duly authorized, have duly executed this Assignment Agreement as of the day and year first above written. ASSIGNOR: WILMINGTON TRUST COMPANY, not in its individual capacity except as expressly provided herein, but solely as trustee under the Pass Through Trust Agreement in respect of the Atlas Air Pass Through Trust 1998-1A-O By: -------------------------------------- Title: ASSIGNEE: WILMINGTON TRUST COMPANY, not in its individual capacity except as expressly provided herein, but solely as trustee under the Pass Through Trust Agreement in respect of the Atlas Air Pass Through Trust 1998-1A-S By: -------------------------------------- Title: 93 Schedule I Schedule of Assigned Documents (1) Intercreditor Agreement dated as of February 9, 1998 among the Trustee, the Other Trustees, the Liquidity Provider, the liquidity providers, if any, relating to the Certificates issued under (and as defined in) each of the Other Agreements and the Subordination Agent. (2) Escrow and Paying Agent Agreement (Class A) dated as of February 9, 1998 among the Escrow Agent, the Placement Agents, the Trustee and the Paying Agent. (3) Note Purchase Agreement dated as of February 9, 1998 among the Company, the Trustee, the Other Trustees, the Depositary, the Escrow Agent, the Paying Agent and the Subordination Agent. (4) Deposit Agreement (Class A) dated as of February 9, 1998 between the Escrow Agent and the Depositary. (5) Each of the Operative Agreements (as defined in the Participation Agreement for each Aircraft) in effect as of the Transfer Date. 94 Schedule II Schedule of Beneficiaries Wilmington Trust Company, not in its individual capacity but solely as Subordination Agent Wilmington Trust Company, not in its individual capacity but solely as Paying Agent ABN AMRO Bank N.V., acting through its Chicago Branch, as Class A Liquidity Provider Atlas Air, Inc. Morgan Stanley & Co. Incorporated, as Placement Agent BT Alex. Brown Incorporated, as Placement Agent Donaldson, Lufkin & Jenrette Securities Corporation., as Placement Agent Goldman, Sachs & Co., as Placement Agent First Security Bank, National Association, as Escrow Agent Each of the other parties to the Assigned Documents EX-10.91 5 PASS THROUGH TRUST AGREEMENT 1998-1A-S 1 EXHIBIT 10.91 EXECUTION COPY - -------------------------------------------------------------------------------- PASS THROUGH TRUST AGREEMENT Dated as of February 9, 1998 between ATLAS AIR, INC. and WILMINGTON TRUST COMPANY as Trustee $300,254,000 Atlas Air Pass Through Trust 1998-1A-S 7.38% Atlas Air 1998-1A-S Initial Pass Through Certificates 7.38% Atlas Air 1998-1A-S Exchange Pass Through Certificates - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 1.02. Compliance Certificates and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 1.03. Form of Documents Delivered to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 1.04. Directions of Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE II ORIGINAL ISSUANCE OF CERTIFICATES: ACQUISITION OF TRUST PROPERTY Section 2.01. Delivery of Documents; Delivery Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 2.02. Withdrawal of Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 2.03. Acceptance by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 2.04. Limitation of Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 ARTICLE III THE CERTIFICATES Section 3.01. Title, Form, Denomination and Execution of Certificates . . . . . . . . . . . . . . . . . . . . . 20 Section 3.02. Restrictive Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 3.03. Authentication of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 3.04. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 3.05. Book-Entry Provisions for U.S. Global Certificate and Offshore Global Certificates . . . . . . . . 25 Section 3.06. Special Transfer Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Section 3.07. Mutilated, Destroyed, Lost or Stolen Certificates . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 3.08. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 3.09. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 3.10. Temporary Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 3.11. Limitation of Liability for Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
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Page ---- ARTICLE IV DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS Section 4.01. Certificate Account and Special Payments Account . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 4.02. Distributions from Certificate Account and Special Payments Account . . . . . . . . . . . . . . . 32 Section 4.03. Statements to Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Section 4.04. Investment of Special Payment Moneys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 ARTICLE V THE COMPANY Section 5.01. Maintenance of Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Section 5.02. Consolidation, Merger, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 ARTICLE VI DEFAULT Section 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 6.02. Incidents of Sale of Equipment Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Section 6.03. Judicial Proceedings Instituted by Trustee; Trustee May Bring Suit . . . . . . . . . . . . . . . . 40 Section 6.04. Control by Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Section 6.05. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Section 6.06. Right of Certificateholders to Receive Payments Not to Be Impaired . . . . . . . . . . . . . . . . 42 Section 6.07. Certificateholders May Not Bring Suit Except Under Certain Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Section 6.08. Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Section 6.09. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 ARTICLE VII THE TRUSTEE Section 7.01. Certain Duties and Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Section 7.02. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Section 7.03. Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ii 4
Page ---- Section 7.04. Not Responsible for Recitals or Issuance of Certificates . . . . . . . . . . . . . . . . . . . . . 45 Section 7.05. May Hold Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 7.06. Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 7.07. Compensation and Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 7.08. Corporate Trustee Required; Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Section 7.09. Resignation and Removal; Appointment of Successor . . . . . . . . . . . . . . . . . . . . . . . . 47 Section 7.10. Acceptance of Appointment by Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Section 7.11. Merger, Conversion, Consolidation or Succession to Business . . . . . . . . . . . . . . . . . . . 49 Section 7.12. Maintenance of Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Section 7.13. Money for Certificate Payments to Be Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . 51 Section 7.14. Registration of Equipment Notes in Trustee's Name . . . . . . . . . . . . . . . . . . . . . . . . 51 Section 7.15. Representations and Warranties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Section 7.16. Withholding Taxes; Information Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Section 7.17. Trustee's Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Section 7.18. Preferential Collection of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 ARTICLE VIII CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE Section 8.01. The Company to Furnish Trustee with Names and Addresses of Certificateholders . . . . . . . . . . 54 Section 8.02. Preservation of Information; Communications to Certificateholders . . . . . . . . . . . . . . . . 54 Section 8.03. Reports by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Section 8.04. Reports by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 ARTICLE IX SUPPLEMENTAL AGREEMENTS Section 9.01. Supplemental Agreements Without Consent of Certificateholders . . . . . . . . . . . . . . . . . . 55 Section 9.02. Supplemental Agreements with Consent of Certificateholders . . . . . . . . . . . . . . . . . . . . 57 Section 9.03. Documents Affecting Immunity or Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 9.04. Execution of Supplemental Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 9.05. Effect of Supplemental Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 9.06. Conformity with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Section 9.07. Reference in Certificates to Supplemental Agreements . . . . . . . . . . . . . . . . . . . . . . . 59
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Page ---- ARTICLE X AMENDMENTS TO INDENTURE AND NOTE DOCUMENTS Section 10.01. Amendments and Supplements to Indenture and Other Note Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 ARTICLE XI TERMINATION OF TRUSTS Section 11.01. Termination of the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 ARTICLE XII MISCELLANEOUS PROVISIONS Section 12.01. Limitation on Rights of Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Section 12.02. Liabilities of Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Section 12.03. Registration of Equipment Notes in Name of Subordination Agent . . . . . . . . . . . . . . . . . 63 Section 12.04. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Section 12.05. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Section 12.06. Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Section 12.07. Trust Indenture Act Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.08. Effect of Headings and Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.09. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.10. Benefits of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.11. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.12. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.13. Communication by Certificateholders with Other Certificateholders . . . . . . . . . . . . . . . . 65 Section 12.14. Intention of Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
iv 6 Reconciliation and tie between Atlas Air Pass Through Trust Agreement, dated as of February 9, 1998 and the Trust Indenture Act of 1939. This reconciliation does not constitute part of the Pass Through Trust Agreement.
Trust Indenture Act Pass Through Trust of 1939 Section Agreement Section ------------------------------------------------ ------------------------------------------------ 310(a)(1) 7.07 (a)(2) 7.07 312(a) 3.05; 8.01; 8.02 313(a) 7.07 314(a) 8.04(a) - (c) (a)(4) 8.04(d) (c)(1) 1.02 (c)(2) 1.02 (d)(1) 7.13; 11.01 (d)(2) 7.13; 11.01 (d)(3) 2.01 (e) 1.02 315(b) 7.02 316(a)(last sentence) 1.01(c) (a)(1)(A) 6.04 (a)(1)(B) 6.05 (b) 6.06 (c) 1.04(d) 317(a)(1) 6.03 (b) 7.13 318(a) 12.05
v 7 PASS THROUGH TRUST AGREEMENT This PASS THROUGH TRUST AGREEMENT, dated as of February 9, 1998 (as the same may be amended, supplemented or modified from time to time, this "Agreement"), between ATLAS AIR, INC., a Delaware corporation (the "Company"), and WILMINGTON TRUST COMPANY, a Delaware trust company, as Trustee, is made with respect to the formation of Atlas Air Pass Through Trust 1998-1A-S and the deemed issuance of 7.38% Atlas Air 1998-1A-S Initial Pass Through Certificates representing fractional undivided interests in the Trust. W I T N E S S E T H: WHEREAS, the Company has obtained commitments from Boeing (such term and certain other capitalized terms used herein are defined below) for the delivery of certain Aircraft; WHEREAS, the Company as of the Transfer Date (as defined below) the Company will have financed the acquisition of all or a portion of such Aircraft either (i) through separate leveraged lease transactions, in which case the Company leases such Aircraft (collectively, the "Leased Aircraft") or (ii) through separate secured loan transactions, in which case the Company owns such Aircraft (collectively, the "Owned Aircraft"); WHEREAS, as of the Transfer Date in the case of each Leased Aircraft, each Owner Trustee, acting on behalf of the corresponding Owner Participant, will have issued pursuant to an Indenture, on a non-recourse basis, Equipment Notes in order to finance a portion of its purchase price of such Leased Aircraft; WHEREAS, as of the Transfer Date in the case of each Owned Aircraft, the Company will have issued pursuant to an Indenture, on a recourse basis, Equipment Notes to finance a portion of the purchase price of such Owned Aircraft; WHEREAS, as of the Transfer Date, the Related Trustee will assign, transfer and deliver all of such trustee's right, title and interest to the trust property held by the Related Trustee to the Trustee pursuant to the Assignment and Assumption Agreement (as defined below); WHEREAS, the Trustee, effective only, but automatically, upon execution and delivery of the Assignment and Assumption Agreement, will be deemed to have delared the creation of the Atlas Air Pass Through Trust 1998-1S (the "Trust") for the benefit of the Certificateholders, and each Holder of Certificates outstanding as of the Transfer Date, as a grantor of the Trust, by its respective acceptance of such Certificates, will join in the creation of this Trust with the Trustee; 8 2 WHEREAS, all Certificates deemed issued by the Trust will evidence fractional undivided interests in the Trust and will convey no rights, benefits or interests in respect of any property other than the Trust Property except for those Certificates to which an Escrow Receipt has been affixed; WHEREAS, to facilitate the sale of Equipment Notes to, and the purchase of Equipment Notes by, the Trustee on behalf of the Trust, the Company has duly authorized the execution and delivery of this Agreement as the "issuer", as such term is defined in and solely for purposes of the Securities Act, of the Certificates to be issued pursuant hereto and as the "obligor", as such term is defined in and solely for purposes of the Trust Indenture Act of 1939, as amended, with respect to all such Certificates and is undertaking to perform certain administrative and ministerial duties hereunder and is also undertaking to pay the ongoing fees and expenses of the Trustee; WHEREAS, upon the execution and delivery of the Assignment and Assumption Agreement, all of the conditions and requirements necessary to make this Agreement, when duly executed and delivered, a valid, binding and legal instrument in accordance with its terms and for the purposes herein expressed, have been done, performed and fulfilled, and the execution and delivery of this Agreement in the form and with the terms hereof have been in all respects duly authorized; WHEREAS, upon issuance of the Exchange Certificates, if any, or the effectiveness of the Shelf Registration Statement, this Agreement as amended or supplemented from time to time, will be subject to the provisions of the Trust Indenture Act of 1939, as amended, and shall, to the extent applicable, be governed by such provisions; NOW, THEREFORE, in consideration of the mutual agreements herein contained, and of other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms used herein that are defined in this Article I have the meanings assigned to them in this Article I, and include the plural as well as the singular; 9 3 (b) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, or by the rules promulgated under the Trust Indenture Act, have the meanings assigned to them therein; (c) all references in this Agreement to designated "Articles", "Sections", "Subsections" and other subdivisions are to the designated Articles, Sections, Subsections and other subdivisions of this Agreement; (d) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section, Subsection or other subdivision; and (e) unless the context otherwise requires, whenever the words "including" "include" or "includes" are used herein, it shall be deemed to be followed by the phrase "without limitation". "Act" has the meaning, with respect to any Certificateholder, specified in Section 1.04(a). "Affiliate" means, with respect to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person. For the purposes of this definition, "control", when used with respect to any specified Person, means the power, directly or indirectly, to direct the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agent Members" has the meaning specified in Section 3.05(a). "Agreement" has the meaning specified in the recitals hereto. "Aircraft" means each of the Aircraft or Substitute Aircraft in respect of which a Participation Agreement is entered into in accordance with the Note Purchase Agreement. "Assignment and Assumption Agreement" means the assignment and assumption agreement substantially in the form of Exhibit E to the Related Pass Through Trust Agreement executed and delivered in accordance with Section 11.01. "Authorized Agent" means, with respect to the Certificates, any Paying Agent or Registrar for the Certificates. 10 4 "Avoidable Tax" has the meaning set forth in Section 7.09(e). "Boeing" means The Boeing Company. "Business Day" means, with respect to the Certificates, any day other than a Saturday, a Sunday or a day on which commercial banks are required or authorized to close in Denver, Colorado, New York, New York, Chicago, Illinois or, so long as any Certificate is outstanding, the city and state in which the Trustee or any related Loan Trustee maintains its Corporate Trust Office or receives and disburses funds. "Certificate" means any one of the Initial Certificates or Exchange Certificates and any such Certificates issued in exchange therefor or replacement thereof pursuant to this Agreement. "Certificate Account" means, with respect to the Certificates, the account or accounts created and maintained for such series pursuant to Section 4.01(a). "Certificateholder" or "Holder" means the Person in whose name a Certificate is registered in the Register for Certificates. "Clearing Agency" means an organization registered as a "clearing agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as amended. "Clearing Agency Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects, directly or indirectly, book-entry transfers and pledges of securities deposited with the Clearing Agency. "Company" means Atlas Air, Inc., a Delaware corporation, or its successor in interest pursuant to Section 5.02, or (only in the context of provisions hereof, if any, when such reference is required for purposes of compliance with the Trust Indenture Act) any other "obligor" (within the meaning of the Trust Indenture Act) with respect to the Certificates. "Controlling Party" means the Person entitled to act as such pursuant to the terms of the Intercreditor Agreement. "Corporate Trust Office" means, with respect to the Trustee or any Loan Trustee, the office of such trustee in the city at which at any particular time its corporate trust business shall be principally administered. 11 5 "Delivery Period Termination Date" has the meaning specified in the Related Pass Through Trust Agreement. "Direction" has the meaning specified in Section 1.04(a). "Equipment Notes" means all of the equipment notes issued under the Indentures. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor federal statute. "Escrow Account" has the meaning specified in Section 2.02(b). "Escrow Agent" means, initially, First Security, National Association, and any replacement or successor therefor appointed in accordance with the Escrow Agreement. "Escrow Agreement" means the Escrow and Paying Agent Agreement dated as of February 9, 1998 relating to the Certificates, among the Escrow Agent, the Escrow Paying Agent, the Related Trustee (and after the Transfer Date, the Trustee) and Placement Agents, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Escrow Paying Agent" means the Person acting as paying agent under the Escrow Agreement. "Escrow Receipt" means the receipt substantially in the form annexed to the Escrow Agreement representing a fractional undivided interest in the funds held in escrow thereunder. "Escrowed Funds" has the meaning specified in Section 2.02(b). "Event of Default" means an Indenture Event of Default under any Indenture pursuant to which Equipment Notes held by such Trust were issued. "Exchange Certificates" means the certificates substantially in the form of Exhibit A to the Related Pass Through Trust Agreement issued in exchange for the Certificates pursuant to the Registration Rights Agreement and authenticated hereunder. "Fractional Undivided Interest" means the fractional undivided interest in a Trust that is evidenced by a Certificate. 12 6 "Global Certificates" has the meaning specified in Section 3.01(d). "Indenture" means each of the separate trust indentures and mortgages relating to the Aircraft, each as specified or described in a Delivery Notice delivered pursuant to the Note Purchase Agreement or the related Participation Agreement, in each case as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Indenture Event of Default" means, with respect to any Indenture, any Indenture Event of Default (as such term is defined in such Indenture). "Initial Regular Distribution Date" means, with respect to the Certificates, the first Regular Distribution Date on which a Scheduled Payment is to be made. "Institutional Accredited Investor" means an institutional investor that is an "accredited investor" within the meaning set forth in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act. "Intercreditor Agreement" means the Intercreditor Agreement dated as of February 9, 1998 among the Related Trustee (and after the Transfer Date, the Trustee), the Related Other Trustees (and after the Transfer Date, the Other Trustees), the Liquidity Providers, the liquidity providers relating to the Certificates issued under (and as defined in) each of the Related Other Pass Through Trust Agreements, and Wilmington Trust Company, as Subordination Agent and as trustee thereunder, as amended, supplemented or otherwise modified from time to time in accordance with its terms. "Issuance Date" means, with respect to the Certificates, the date of the issuance of such Certificates. "Investors" means the Placement Agents together with all subsequent beneficial owners of the Certificates. "Lease" means, with respect to each Leased Aircraft, any lease between an Owner Trustee, as the lessor, and the Company, as the lessee, referred to in the related Indenture, as such lease may be amended, supplemented or otherwise modified in accordance with its terms; and "Leases" means all such Leases. "Leased Aircraft" has the meaning specified in the recitals hereto. 13 7 "Leased Aircraft Participation Agreement" means any participation agreement substantially in the form of Exhibit A-1 to the Note Purchase Agreement, as the same may be amended, supplemented or otherwise modified in accordance with its terms. "Letter of Representations" means, with respect to the Certificates, an agreement among the Company, the Related Trustee (and after the Transfer Date, the Trustee) and the initial Clearing Agency. "Liquidity Facility" means, with respect to the Certificates, any revolving credit agreement, letter of credit or similar facility relating to the Certificates between a bank or other financial institution and a Subordination Agent, as amended, replaced, supplemented or otherwise modified from time to time in accordance with its terms and the terms of any Intercreditor Agreement. "Liquidity Provider" means, with respect to the Certificates, a bank or other financial institution that agrees to provide a Liquidity Facility for the benefit of the holders of Certificates. "Loan Trustee" means, with respect to any Equipment Note or the Indenture applicable thereto, the bank or trust company designated as loan or indenture trustee under such Indenture, and any successor to such Loan Trustee as such trustee; and "Loan Trustees" means all of the Loan Trustees under the Indentures. "Non-U.S. Person" means a Person that is not a "U.S. person", as defined in Regulation S. "Note Documents" means, with respect to the Certificates, the Equipment Notes with respect to such Certificates and, with respect to such Equipment Notes, the related Indenture, Note Purchase Agreement and, if the related Aircraft is leased to the Company, the related Lease and the related Owner Trustee's Purchase Agreement. "Note Purchase Agreement" means, with respect to the Certificates, any note purchase, refunding, participation or similar agreement; and "Note Purchase Agreements" means all such agreements. "Offering Memorandum" means the Offering Memorandum dated January 27, 1998 relating to the offering of the Certificates and the certificates offered under the Related Other Pass Through Trust Agreements. "Officer's Certificate" means a certificate signed, (a) in the case of the Company, by the Chairman or Vice Chairman of the Board of Directors, the 14 8 President, any Vice President or the Treasurer of the Company, signing alone, or (b) in the case of the Trustee or an Owner Trustee or a Loan Trustee, a Responsible Officer of the Trustee or such Owner Trustee or such Loan Trustee, as the case may be. "Offshore Certificates Exchange Date" has the meaning specified in Section 3.01(d). "Offshore Global Certificates" has the meaning specified in Section 3.01(d). "Offshore Physical Certificates" has the meaning specified in Section 3.01(e). "Opinion of Counsel" means a written opinion of legal counsel who (a) in the case of counsel for the Company may be (i) a senior attorney of the Company one of whose principal duties is furnishing advice as to legal matters, (ii) Cahill Gordon & Reindel or (iii) such other counsel designated by the Company and reasonably acceptable to the Trustee and (b) in the case of any Owner Trustee or any Loan Trustee, may be such counsel as may be designated by any of them whether or not such counsel is an employee of any of them, and who shall be reasonably acceptable to the Trustee. "Other Pass Through Trust Agreements" means each of the two other Atlas Air 1998-1 Pass Through Trust Agreements relating to Atlas Air Pass Through Trust, Series 1998-1B-S and Atlas Air Pass Through Trust, Series 1998-1C-S, dated the date hereof. "Other Trustees" means the trustees under the Other Pass Through Trust Agreements, and any successor or other trustee appointed as provided therein. "Other Trusts" means the Atlas Air Pass Through Trust 1998-1B-S and the Atlas Air Pass Through Trust 1998-1C-S, each created on the date hereof. "Outstanding" when used with respect to Certificates, means, as of the date of determination, all Certificates theretofore authenticated and delivered under this Agreement, except: (a) Certificates theretofore cancelled by the Registrar or delivered to the Trustee or the Registrar for cancellation; (b) All of the Certificates if money in the full amount required to make the final distribution with respect to such series pursuant to Section 11.01 hereof has been theretofore deposited with the Trustee in trust 15 9 for the Holders of the Certificates as provided in Section 4.01 pending distribution of such money to such Certificateholders pursuant to payment of such final distribution payment; and (c) Certificates in exchange for or in lieu of which other Certificates have been authenticated and delivered pursuant to this Agreement. "Owned Aircraft" has the meaning specified in the recitals hereto. "Owned Aircraft Participation Agreement" means any participation agreement substantially in the form of Exhibit C-1 to the Note Purchase Agreement, as the same may be amended, supplemented or otherwise modified in accordance with its terms. "Owner Trustee's Purchase Agreement" has the meaning, with respect to the Certificates if the related Aircraft is leased to the Company, specified therefor in the related Lease. "Participation Agreement" means, collectively, the Leased Aircraft Participation Agreement and the Owned Aircraft Participation Agreement. "Paying Agent" means, with respect to the Certificates, the paying agent maintained and appointed for the Certificates pursuant to Section 7.12. "Permanent Offshore Global Certificates" has the meaning specified in Section 3.01(d). "Permitted Investments" means obligations of the United States of America or agencies or instrumentalities thereof for the payment of which the full faith and credit of the United States of America is pledged, maturing in not more than 60 days after the date of acquisition thereof or such lesser time as is required for the distribution of any Special Payments on a Special Distribution Date. "Person" means any person, including any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, trustee, unincorporated organization, or government or any agency or political subdivision thereof. "Physical Certificates" has the meaning specified in Section 3.01. "Placement Agents" means Morgan Stanley & Co. Incorporated, BT Alex. Brown Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co. 16 10 "Placement Agreement" means the Placement Agreement dated January 27, 1998 among the Placement Agents and the Company, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Pool Balance" means, as of any date, (i) the original aggregate face amount of the Certificates as defined in the Related Pass Through Trust Agreement less (ii) the aggregate amount of all payments made in respect of the Certificates other than payments made in respect of interest or premium thereon or reimbursement of any costs or expenses incurred in connection therewith. The Pool Balance as of any Distribution Date shall be computed after giving effect to the payment of principal, if any, on the Equipment Notes or other Trust Property held in the Trust and the distribution thereof to be made on such Distribution Date. "Pool Factor" means, as of any date, the quotient (rounded to the seventh decimal place) computed by dividing (i) the Pool Balance of such series as at such date by (ii) the original aggregate face amount of the Certificates as defined in the Related Pass Through Trust Agreement. The Pool Factor as of any Distribution Date shall be computed after giving effect to the payment of principal, if any, on the Equipment Notes or other Trust Property held in the Trust and the distribution thereof to be made on such Distribution Date. "Potential Purchaser" has the meaning, with respect to any Certificateholder, specified in Section 6.01(b). "Private Placement Legend" has the meaning specified in Section 3.02(a). "PTC Event of Default" means, with respect to the Certificates, any failure to pay within ten Business Days of the due date thereof: (i) the outstanding Pool Balance of such series of Certificates on the date specified in any Trust Supplement for such payment or (ii) interest due on the Certificates on any Distribution Date (unless the related Subordination Agent shall have made an Interest Drawing or Drawings (as defined in the related Intercreditor Agreement), or a withdrawal or withdrawals pursuant to a cash collateral account under such Intercreditor Agreement, with respect thereto in an aggregate amount sufficient to pay such interest and shall have distributed such amount to the Trustee). "Purchasing Certificateholder" has the meaning, with respect to any Certificateholder, specified in Section 6.01(b). "QIB" means a qualified institutional buyer as defined in Rule 144A. 17 11 "Record Date" means, with respect to any Trust or the related series of Certificates, (i) for Scheduled Payments to be distributed on any Regular Distribution Date, other than the final distribution with respect to such series, the 15th day (whether or not a Business Day) preceding such Regular Distribution Date, and (ii) for Special Payments to be distributed on any Special Distribution Date, other than the final distribution with respect to such series, the 15th day (whether or not a Business Day) preceding such Special Distribution Date. "Register" and "Registrar" means, each with respect to the Certificates, the register maintained and the registrar appointed pursuant to Sections 3.04 and 7.12. "Registration Event" has the meaning set forth in the Placement Agreement. "Registration Rights Agreement" means the Registration Rights Agreement dated February 9, 1998, among the Placement Agents, the Related Trustee (and after the Transfer Date, the Trustee), the Related Other Trustees (and after the Transfer Date, the Other Trustees) and the Company, as amended, supplemented or otherwise modified from time to time in accordance with its terms. "Registration Statement" means the Registration Statement defined in the Registration Rights Agreement. "Regular Distribution Date" means, with respect to distributions of Scheduled Payments in respect of any series of Certificates, each date designated as such in this Agreement, until payment of all the Scheduled Payments to be made under the Equipment Notes held in the Trust have been made. "Regulation S" means Regulation S under the Securities Act or any successor regulation thereto. "Related Pass Through Trust Agreement" means the Atlas Air 1998-1A-0 Pass Through Trust Agreement relating to the Atlas Air Pass Through Trust 1998-1A-0 and entered into by the Company and the Related Trustee, as amended, supplemented or otherwise modified from time to time in accordance with its terms. "Related Trust" means the Atlas Pass Through Trust 1998-1A-O, formed under the Related Pass Through Trust Agreement. "Related Trustee" means the trustee under the Related Pass Through Trust Agreement. 18 12 "Request" means a request by the Company setting forth the subject matter of the request accompanied by an Officer's Certificate and an Opinion of Counsel as provided in Section 1.02 of this Agreement. "Responsible Officer" means, with respect to any Trustee, any Loan Trustee and any Owner Trustee, any officer in the Corporate Trust Department of the Trustee, Loan Trustee or Owner Trustee or any other officer customarily performing functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of his knowledge of and familiarity with a particular subject. "Responsible Party" means, with respect to the Certificates, the person designated as such in the related Trust Supplement. "Rule 144A" means Rule 144A under the Securities Act and any successor rule thereto. "Scheduled Payment" means, with respect to any Equipment Note, (i) any payment of principal or interest on such Equipment Note (other than any such payment which is not in fact received by the Trustee or any Subordination Agent within five days of the date on which such payment is scheduled to be made) or (ii) any payment of interest on the Certificates with funds drawn under the Liquidity Facility for such series, which payment represents the installment of principal on such Equipment Note at the stated maturity of such installment, the payment of regularly scheduled interest accrued on the unpaid principal amount of such Equipment Note, or both; provided, however, that any payment of principal, premium, if any, or interest resulting from the redemption or purchase of any Equipment Note shall not constitute a Scheduled Payment. "SEC" means the Securities and Exchange Commission, as from time to time constituted or created under the Securities Exchange Act of 1934, as amended, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties on such date. "Selling Certificateholder" has the meaning, with respect to any Certificateholder, specified in Section 6.01(b). "Shelf Registration Statement" has the meaning set forth in the Registration Rights Agreement. 19 13 "Special Distribution Date" means, with respect to the Certificates, each date on which a Special Payment is to be distributed as specified in this Agreement. "Special Payment" means (i) any payment (other than a Scheduled Payment) in respect of, or any proceeds of, any Equipment Note or Trust Indenture Estate (as defined in each Indenture) or Special Redemption Premium, (ii) the amounts required to be distributed pursuant to the last paragraph of Section 2.02(b) or (iii) the amounts required to be distributed pursuant to the penultimate paragraph of Section 2.02(b). "Special Payments Account" means, with respect to the Certificates, the account or accounts created and maintained for such series pursuant to Section 4.01(b) and the related Trust Supplement. "Special Redemption Premium" means the premium payable by the Company in respect of the Final Withdrawal pursuant to the Note Purchase Agreement. "Specified Investments" means, with respect to any Trust, (i) obligations of, or guaranteed by, the United States Government or agencies thereof, (ii) open market commercial paper of any corporation incorporated under the laws of the United States of America or any state thereof rated at least P-2 or its equivalent by Moody's Investors Service, Inc. or at least A-2 or its equivalent by Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., (iii) certificates of deposit issued by commercial banks organized under the laws of the United States or of any political subdivision thereof having a combined capital and surplus in excess of $100,000,000 which banks or their holding companies have a rating of A or its equivalent by Moody's Investors Service, Inc. or Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc.; provided, however, that the aggregate amount at any one time so invested in certificates of deposit issued by any one bank shall not exceed 5% of such bank's capital and surplus, (iv) U.S. dollar- denominated offshore certificates of deposit issued by, or offshore time deposits with, any commercial bank described in clause (iii) above or any subsidiary thereof and (v) repurchase agreements with any financial institution having combined capital and surplus of at least $100,000,000 with any of the obligations described in clauses (i) through (iv) above as collateral; provided further that if all of the above investments are unavailable, the entire amounts to be invested may be used to purchase federal funds from an entity described in clause (iii) above. "Subordination Agent" has the meaning specified therefor in the Intercreditor Agreement. "Substitute Aircraft" has the meaning specified in the Note Purchase Agreement. 20 14 "Temporary Offshore Global Certificates" has the meaning specified in Section 3.01(d). "Transfer Date" has the meaning specified in Section 11.01. "Triggering Event" has the meaning specified therefor in the Intercreditor Agreement. "Trust" means the trust under this Agreement. "Trustee" means Wilmington Trust Company, or its successor in interest, and any successor or other trustee appointed as provided herein. "Trustee's Liens" has the meaning specified in Section 7.17. "Trust Indenture Act", except as otherwise provided in Section 9.06, means, with respect to any particular Trust, the United States Trust Indenture Act of 1939, as in force at the date as of which the related Pass Through Trust Agreement was executed. "Trust Property" means (i) subject to the Intercreditor Agreement, the Equipment Notes held as the property of the Trust, all monies at any time paid thereon and all monies due and to become due thereunder, (ii) funds from time to time deposited in the Escrow Account, the Certificate Account and the Special Payments Account and, subject to the Intercreditor Agreement, any proceeds from the sale by the Trustee pursuant to Article VI hereof of any such Equipment Note, (iii) all rights of the Trust and the Trustee, on behalf of the Trust, under the Intercreditor Agreement, the Escrow Agreement, the Note Purchase Agreement and the Liquidity Facilities, including, without limitation, all rights to receive certain payments thereunder, and all monies paid to the Trustee on behalf of the Trust pursuant to the Intercreditor Agreement or the Liquidity Facilities, provided that rights with respect to the Deposits or under the Escrow Agreement, will not constitute Trust Property. "U.S. Global Certificate" has the meaning specified in Section 3.01(c). "U.S. Physical Certificates" has the meaning specified in Section 3.01(e). "7.38% 1998-1A Initial Pass Through Certificates" has the meaning specified in Section 3.01(a). "7.38% 1998-1A Exchange Pass Through Certificates" has the meaning specified in Section 3.01(a). 21 15 Section 1.02. Compliance Certificates and Opinions. Upon any application or request by the Company, any Owner Trustee or any Loan Trustee to the Trustee to take any action under any provision of this Agreement, the Company, such Owner Trustee or such Loan Trustee, as the case may be, shall furnish to the Trustee (i) an Officer's Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Agreement relating to the proposed action have been complied with and (ii) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Agreement relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Agreement (other than a certificate provided pursuant to Section 8.04(d)) shall include: (a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions in this Agreement relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. Section 1.03. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters and any such Person may certify or give an opinion as to such matters in one or several documents. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Agreement, they may, but need not, be consolidated and form one instrument. 22 16 Section 1.04. Directions of Certificateholders. (a) Any direction, consent, request, demand, authorization, notice, waiver or other action provided by this Agreement in respect of the Certificates to be given or taken by Certificateholders (a "Direction") may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Certificateholders in person or by an agent or proxy duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, when it is hereby expressly required pursuant to this Agreement, to the Company or any Loan Trustee. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Certificateholders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent or proxy shall be sufficient for any purpose of this Trust Agreement and conclusive in favor of the Trustee, the Company and the related Loan Trustee, if made in the manner provided in this Section 1.04. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the certificate of any notary public or other officer of any jurisdiction authorized to take acknowledgments of deeds or administer oaths that the Person executing such instrument acknowledged to him the execution thereof, or by an affidavit of a witness to such execution sworn to before any such notary or such other officer, and where such execution is by an officer of a corporation or association or a member of a partnership, on behalf of such corporation, association or partnership, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other reasonable manner which the Trustee deems sufficient. (c) In determining whether the Certificateholders of the requisite Fractional Undivided Interests of Certificates Outstanding have given any Direction under this Agreement, Certificates owned by the Company or any Affiliate thereof shall be disregarded and deemed not to be Outstanding for purposes of any such determination. In determining whether the Trustee shall be protected in relying upon any such Direction, only Certificates which the Trustee knows to be so owned shall be so disregarded. Notwithstanding the foregoing, (i) if any such Person owns 100% of the Certificates Outstanding, such Certificates shall not be so disregarded, and (ii) if any amount of Certificates so owned by any such Person have been pledged in good faith, such Certificates shall not be disregarded if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Certificates and that the pledgee is not the Company or any Affiliate thereof. (d) The Company may, at its option, by delivery of an Officer's Certificate to the Trustee, set a record date to determine the Certificateholders in respect of the Certificates, entitled to give any Direction. Notwithstanding Section 316(c) of the Trust 23 17 Indenture Act, such record date shall be the record date specified in such Officer's Certificate, which shall be a date not more than 30 days prior to the first solicitation of Certificateholders of the applicable series in connection therewith. If such a record date is fixed, such Direction may be given before or after such record date, but only the Certificateholders of record of the applicable series at the close of business on such record date shall be deemed to be Certificateholders for the purposes of determining whether Certificateholders of the requisite proportion of Outstanding Certificates have authorized or agreed or consented to such Direction, and for that purpose the Outstanding Certificates shall be computed as of such record date; provided, however, that no such Direction by the Certificateholders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Agreement not later than one year after such record date. (e) Any Direction by the Holder of any Certificate shall bind the Holder of every Certificate issued upon the transfer thereof or in exchange therefor or in lieu thereof, whether or not notation of such Direction is made upon such Certificate. (f) Except as otherwise provided in Section 1.04(c), Certificates owned by or pledged to any Person shall have an equal and proportionate benefit under the provisions of this Agreement, without preference, priority or distinction as among all of the Certificates. ARTICLE II ACQUISITION OF THE TRUST PROPERTY Section 2.01. Acquisition of Trust Property. The Trustee is hereby irrevocably authorized and directed to execute and deliver the Assignment and Assumption Agreement on the date specified in Section 11.01 of the Related Pass Through Trust Agreement, subject only to the satisfaction of the conditions set forth in said Section 11.01. This Agreement (except only for the immediately preceding sentence hereof, which is effective upon execution and delivery hereof) shall become effective upon the execution and delivery of the Assignment and Assumption Agreement by the Trustee and the Related Trustee, automatically and without any further signature or action on the part of the Company and the Trustee, and shall thereupon constitute the legal, valid and binding obligation of the parties hereto enforceable against each of the parties hereto in accordance with its terms. Upon such execution and delivery of the Assignment and Assumption Agreement, the Related Trust shall be terminated, the Certificateholders shall receive beneficial interests in the Trust in exchange for their interests in the Related Trust equal to their respective beneficial interests in the Related Trust and the "Outstanding" (as defined in the Related Pass Through Trust Agreement) pass through certificates representing fractional undivided interests in the Related Trust shall be deemed for all purposes of this Agreement, 24 18 without further signature or action of any party or Certificateholder, to be Certificates representing the same Fractional Undivided Interests in the Trust and Trust Property. By acceptance of its Certificate, each Certificateholder consents to and ratifies such assignment, transfer and delivery of the trust property of the Related Trust to the Trustee upon the execution and delivery of the Assignment and Assumption Agreement. Section 2.02. [Intentionally omitted] Section 2.03. Acceptance by Trustee. The Trustee, upon the execution and delivery of the Assignment and Assumption Agreement, acknowledges its acceptance of all right, title and interest in and to the Trust Property and will hold such right, title and interest for the benefit of all then present and future Certificateholders, upon the trusts herein set forth. By its payment for and acceptance of each Certificate issued under the Related Pass Through Trust Agreement and deemed issued under this Agreement, each Holder of such Certificate as grantor of such Trust thereby joins in the creation and declaration of such Trust. Section 2.04. Limitation of Powers. The Trust is constituted solely for the purpose of making the investment in the Equipment Notes, and, except as set forth herein, the Trustee shall not be authorized or empowered to acquire any other investments or engage in any other activities and, in particular, the Trustee shall not be authorized or empowered to do anything that would cause such Trust to fail to qualify as a "grantor trust" for federal income tax purposes (including, as subject to this restriction, acquiring any Aircraft (as defined in the respective Indentures) by bidding such Equipment Notes or otherwise, or taking any action with respect to any such Aircraft once acquired). ARTICLE III THE CERTIFICATES Section 3.01. Title, Form, Denomination and Execution of Certificates. (a) The Initial Certificates shall be known as the "7.38% 1998-1A-S Initial Pass Through Certificates" and the Exchange Certificates shall be known as the "7.38% 1998-1A-S Exchange Pass Through Certificates", in each case, of the Trust. Each Certificate will represent a fractional undivided interest in the Trust and shall be substantially in the form set forth as Exhibit A to the Related Pass Through Trust Agreement, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by the Related Pass Through Trust Agreement or by this Agreement, as the case may be, or as the Trustee may deem appropriate, to reflect the fact that the Certificates are being issued hereunder as opposed to under the Related Pass Through Trust Agreement and may have such letters, numbers or other marks of identification and such legends or endorsements 25 19 placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Certificates, as evidenced by their execution of the Certificates. Any portion of the text of any Certificate may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Certificate. (b) The Initial Certificates shall be issued only in fully registered form without coupons and only in denominations of $100,000 or integral multiples of $1,000 in excess thereof, except that one Certificate may be issued in a denomination of less than $100,000. The Exchange Certificates will be issued in denominations of $1,000 or integral multiples thereof. Each Certificate shall be dated the date of its authentication. The aggregate Fractional Undivided Interest of Certificates initially deemed issued hereunder shall not at any time exceed the aggregate principal amount of "Outstanding" pass through trust certificates representing fractional undivided interests in the Related Trust on the Transfer Date. (c) Initial Certificates offered and sold in reliance on Rule 144A shall be issued initially in the form of a single permanent global Certificate in registered form, substantially in the form set forth as Exhibit A to the Related Pass Through Trust Agreement (the "U.S. Global Certificate"), duly executed and authenticated by the Trustee as hereinafter provided. The U.S. Global Certificate will be registered in the name of a nominee for the Depositary and deposited with the Trustee, as custodian for the Depositary. The aggregate principal amount of the U.S. Global Certificate may from time to time be increased or decreased by adjustments made on the records of the Depositary or its nominee, or of the Trustee, as custodian for the Depositary or its nominee, as hereinafter provided. (d) Initial Certificates offered and sold in offshore transactions in reliance on Regulation S shall be issued initially in the form of a single temporary global Certificate in registered form, substantially in the form set forth as Exhibit A to the Related Pass Through Trust Agreement (the "Temporary Offshore Global Certificate") duly executed and authenticated by the Trustee as hereinafter provided. The Temporary Offshore Global Certificates will be registered in the name of a nominee of the Depositary for credit to the account of the Agent Members acting as depositaries for Euroclear and Cedel and deposited with the Trustee as custodian for the Depositary. At any time following March 21, 1998 (the "Offshore Certificates Exchange Date"), upon receipt by the Trustee of a certificate substantially in the form of Exhibit B to the Related Pass Through Trust Agreement, a single permanent global Certificate in registered form substantially in the form set forth in Exhibit A (the "Permanent Offshore Global Certificate"; and together with the Temporary Offshore Global Certificate, the "Offshore Global Certificates"), duly executed and authenticated by the Trustee as hereinafter provided, shall be registered in the name of a nominee for the Depositary and deposited with the Trustee, as custodian for the Depositary, and the Registrar shall reflect on its books and records the date of such transfer and a decrease in the principal 26 20 amount of any Temporary Offshore Global Certificate in an amount equal to the principal amount of the beneficial interest in such Temporary Offshore Global Certificate transferred. The U.S. Global Certificate and the Offshore Global Certificates are sometimes referred to as the "Global Certificates". (e) Initial Certificates offered and sold to Institutional Accredited Investors shall be issued in the form of permanent certificated Certificates in registered form in substantially the form set forth as Exhibit A to the Related Pass Through Trust Agreement (the "U.S. Physical Certificates"). Certificates issued pursuant to Section 3.05(b) in exchange for interests in any Offshore Global Certificate shall be in the form of permanent certificated Certificates in registered form substantially in the form set forth in Exhibit A (the "Offshore Physical Certificates"). The Offshore Physical Certificates and U.S. Physical Certificates are sometimes collectively herein referred to as the "Physical Certificates". (f) The Exchange Certificates shall be issued in the form of one or more global Certificates substantially in the form of Exhibit A to the Related Pass Through Trust Agreement (each, a "Global Exchange Certificate"), except that (i) the Private Placement Legend (hereinafter defined) shall be omitted and (ii) such Exchange Certificates shall contain such appropriate insertions, omissions, substitutions and other variations from the form set forth in Exhibit A to the Related Pass Through Trust Agreement relating to the nature of the Exchange Certificates as the Responsible Officer of the Trustee executing such Exchange Certificates on behalf of the Trust may determine, as evidenced by such officer's execution on behalf of the Trust of such Exchange Certificates. Such Global Exchange Certificates shall be in registered form and be registered in the name of DTC and deposited with the Trustee, at its Corporate Trust Office, as custodian for DTC. The aggregate principal amount of any Global Exchange Certificate may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC for such Global Exchange Certificate, which adjustments shall be conclusive as to the aggregate principal amount of any such Global Exchange Certificate. Subject to clause (i) and (ii) of the first sentence of this Section 3.01(f), the terms hereof applicable to Restricted Global Certificates and/or Global Certificates shall apply to the Global Exchange Certificates, mutatis mutandis. (g) The definitive Certificates shall be in registered form and shall be typed, printed, lithographed or engraved or produced by any combination of these methods or may be produced in any other manner, all as determined by the officers executing such Certificates, as evidenced by their execution of such Certificates. Section 3.02. Restrictive Legends. (a) Subject to Section 3.06, unless and until (i) an Initial Certificate is sold under an effective Registration Statement or (ii) an Initial Certificate is exchanged for an Exchange Certificate pursuant to an effective Exchange Offer Registration Statement, in each case as provided for in the Registration Rights Agreement, 27 21 each Global Certificate (other than the Permanent Offshore Global Certificate) and each U.S. Physical Certificate shall bear the following legend (the "Private Placement Legend") on the face thereof: THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS CERTIFICATE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT; (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFICATE WAS HELD BY ATLAS AIR, INC., THE TRUSTEE OR ANY AFFILIATE OF ANY OF SUCH PERSONS RESELL OR OTHERWISE TRANSFER THIS CERTIFICATE EXCEPT (A) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (B) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING $100,000 OR MORE AGGREGATE PRINCIPAL AMOUNT OF SUCH CERTIFICATE THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS CERTIFICATE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT; AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS CERTIFICATE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS CERTIFICATE WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFICATE WAS HELD BY ATLAS AIR, 28 22 INC., THE TRUSTEE OR ANY AFFILIATE OF ANY OF SUCH PERSONS THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE PASS THROUGH TRUST AGREEMENT CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS CERTIFICATE IN VIOLATION OF THE FOREGOING RESTRICTIONS. (b) Each Global Certificate shall also bear the following legend on the face thereof: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE PASS THROUGH TRUST AGREEMENT REFERRED TO HEREIN. Section 3.03. Authentication of Certificates. (a) [Intentionally omitted] (b) No Certificate shall be entitled to any benefit under this Agreement or be valid or obligatory for any purpose, unless there appears on such Certificate a certificate of authentication substantially in the form provided for herein executed by the Related Trustee or by the Trustee by the manual signature of one of its authorized signatories, and 29 23 such certificate upon any Certificate shall be conclusive evidence, and the only evidence, that such Certificate has been duly authenticated and delivered hereunder. Section 3.04. Transfer and Exchange. The Trustee shall cause to be kept at the office or agency to be maintained by it in accordance with the provisions of Section 7.12 of this Agreement a register (the "Register") for the Certificates in which, subject to such reasonable regulations as it may prescribe, the Trustee shall provide for the registration of the Certificates and of transfers and exchanges of the Certificates as herein provided. The Trustee shall initially be the registrar (the "Registrar") for the purpose of registering the Certificates and transfers and exchanges of the Certificates as herein provided. A Certificateholder may transfer a Certificate by written application to the Registrar stating the name of the proposed transferee and otherwise complying with the terms of this Agreement, including providing a written certificate or other evidence of compliance with any restrictions on transfer. No such transfer shall be effected until, and such transferee shall succeed to the rights of a Certificateholder only upon, final acceptance and registration of the transfer by the Registrar in the Register. Prior to the registration of any transfer by a Certificateholder as provided herein, the Trustee shall treat the person in whose name the Certificate is registered as the owner thereof for all purposes, and the Trustee shall not be affected by notice to the contrary. Furthermore, the Depositary shall, by acceptance of a Global Certificate, agree that transfers of beneficial interests in such Global Certificate may be effected only through a book-entry system maintained by the Depositary (or its agent), and that ownership of a beneficial interest in the Certificate shall be required to be reflected in a book entry. When Certificates are presented to the Registrar with a request to register the transfer or to exchange them for an equal face amount of Certificates of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its requirements for such transactions are met. To permit registrations of transfers and exchanges in accordance with the terms, conditions and restrictions hereof, the Trustee shall execute and authenticate Certificates at the Registrar's request. No service charge shall be made for any registration of transfer or exchange of the Certificates, but the Trustee may require payment by the transferor of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or other similar governmental charges payable upon exchanges pursuant to Section 3.10 or 9.07). Section 3.05. Book-Entry Provisions for U.S. Global Certificate and Offshore Global Certificates. (a) Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Agreement with respect to any Global Certificate held on their behalf by the Depositary, or the Trustee as its custodian, and the Depositary may be treated by the Trustee and any agent of the Trustee as the absolute owner of such Global Certificate for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Trustee or any agent of the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or shall impair, as between the Depositary 30 24 and its Agent Members, the operation of customary practices governing the exercise of the rights of a holder of any Certificate. Upon the issuance of any Global Certificate, the Registrar or its duly appointed agent shall record a nominee of the Depositary as the registered holder of such Global Certificate. (b) Transfers of any Global Certificate shall be limited to transfers of such Global Certificate or Offshore Global Certificate in whole, but not in part, to nominees of the Depositary, its successor or such successor's nominees. Beneficial interests in the U.S. Global Certificate and any Offshore Global Certificate may be transferred in accordance with the rules and procedures of the Depositary and the provisions of Section 3.06. Beneficial interests in the U.S. Global Certificate or an Offshore Global Certificate shall be delivered to all beneficial owners in the form of U.S. Physical Certificates or Offshore Physical Certificates, as the case may be, if (i) the Depositary notifies the Trustee that it is unwilling or unable to continue as Depositary for the U.S. Global Certificate or such Offshore Global Certificate, as the case may be, and a successor depositary is not appointed by the Trustee within 90 days of such notice or (ii) an Event of Default has occurred and is continuing and the Registrar has received a request from the Depositary to issue Physical Certificates. (c) Any beneficial interest in one of the Global Certificates that is transferred to a Person who takes delivery in the form of an interest in the other Global Certificate will, upon such transfer, cease to be an interest in such Global Certificate and become an interest in the other Global Certificate and, accordingly, will thereafter be subject to all transfer restrictions, if any, and other procedures applicable to beneficial interests in such other Global Certificate for as long as it remains such an interest. (d) In connection with the transfer of the entire U.S. Global Certificate or an entire Offshore Global Certificate to the beneficial owners thereof pursuant to paragraph (b) of this Section 3.05, such U.S. Global Certificate or Offshore Global Certificate, as the case may be, shall be deemed to be surrendered to the Trustee for cancellation, and the Trustee shall execute, authenticate and deliver, to each beneficial owner identified by the Depositary in exchange for its beneficial interest in such U.S. Global Certificate or Offshore Global Certificate, as the case may be, an equal aggregate principal amount of U.S. Physical Certificates or Offshore Physical Certificates, as the case may be, of authorized denominations. (e) Any U.S. Physical Certificate delivered in exchange for an interest in the U.S. Global Certificate pursuant to paragraph (b) of this Section 3.05 shall, except as otherwise provided by paragraph (f) of Section 3.06, bear the Private Placement Legend. (f) Any Offshore Physical Certificate delivered in exchange for an interest in an Offshore Global Certificate pursuant to paragraph (b) of this Section shall, except as 31 25 otherwise provided by paragraph (f) of Section 3.06, bear the applicable legend regarding transfer restrictions set forth in Section 3.02(a). (g) The registered holder of the U.S. Global Certificate or any Offshore Global Certificate may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Agreement or the Certificates. Section 3.06. Special Transfer Provisions. Unless and until (i) an Initial Certificate is sold under an effective Registration Statement, or (ii) an Initial Certificate is exchanged for an Exchange Certificate pursuant to an effective Exchange Offer Registration Statement, in each case pursuant to the Registration Rights Agreement, the following provisions shall apply to such Initial Certificates: (a) Transfers to Non-QIB Institutional Accredited Investors. The following provisions shall apply with respect to the registration of any proposed transfer of a Certificate to any Institutional Accredited Investor which is not a QIB (excluding transfers to or by Non-U.S. Persons): (i) The Registrar shall register the transfer of any Certificate, whether or not such Certificate bears the Private Placement Legend, if (x) the requested transfer is at least three years after the later of the original issue date of the Certificates and the last date on which such Certificate was held by the Company or any affiliate of any such persons or (y) the proposed transferee has delivered to the Registrar a letter substantially in the form of Exhibit D to the Related Pass Through Trust Agreement and the aggregate principal amount of the Certificates being transferred is at least $100,000. (ii) If the proposed transferor is an Agent Member holding a beneficial interest in the U.S. Global Certificate, upon receipt by the Registrar of (x) the documents, if any, required by paragraph (i) and (y) instructions given in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records the date of the transfer and a decrease in the principal amount of such U.S. Global Certificate in an amount equal to the principal amount of the beneficial interest in such U.S. Global Certificate to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver to the transferor or at its direction, one or more U.S. Physical Certificates of like tenor and amount. (b) Transfers to QIBs. The following provisions shall apply with respect to the registration of any proposed transfer of an Initial Certificate to a QIB (excluding Non-U.S. Persons): 32 26 (i) If the Certificate to be transferred consists of U.S. Physical Certificates or an interest in any Temporary Offshore Global Certificate, the Registrar shall register the transfer if such transfer is being made by a proposed transferor who has checked the box provided for on the form of Initial Certificate stating, or has otherwise advised the Trustee and the Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on the form of Initial Certificate stating, or has otherwise advised the Trustee and the Registrar in writing, that it is purchasing the Initial Certificate for its own account or an account with respect to which it exercises sole investment discretion and that it, or the Person on whose behalf it is acting with respect to any such account, is a QIB within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Trust and/or the Company as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A. (ii) Upon receipt by the Registrar of the documents referred to in clause (i) above and instructions given in accordance with the Depositary's and the Registrar's procedures therefor, the Registrar shall reflect on its books and records the date of such transfer and an increase in the principal amount of the U.S. Global Certificate in an amount equal to the principal amount of the U.S. Physical Certificates or interests in the Temporary Offshore Global Certificate, as the case may be, being transferred, and the Trustee shall cancel such Physical Certificates or decrease the amount of such Temporary Offshore Global Certificate so transferred. (c) Transfers of Interests in the Permanent Offshore Global Certificate or Offshore Physical Certificates. The Registrar shall register any transfer of interests in the Permanent Offshore Global Certificate or Offshore Physical Certificates without requiring any additional certification. (d) Transfers to Non-U.S. Persons at Any Time. The following provisions shall apply with respect to any registration of any transfer of an Initial Certificate to a Non-U.S. Person: (i) Prior to the Offshore Certificates Exchange Date, the Registrar shall register any proposed transfer of an Initial Certificate to a Non-U.S. Person upon receipt of a certificate substantially in the form set forth as Exhibit C to the Related Pass Through Trust Agreement from the proposed transferor. 33 27 (ii) On and after the Offshore Certificates Exchange Date, the Registrar shall register any proposed transfer to any Non-U.S. Person if the Certificate to be transferred is a U.S. Physical Certificate or an interest in the U.S. Global Certificate, upon receipt of a certificate substantially in the form of Exhibit C from the proposed transferor. The Registrar shall promptly send a copy of such certificate to the Company. (iii) Upon receipt by the Registrar of (x) the documents, if any, required by paragraph (ii) and (y) instructions in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records the date of such transfer and a decrease in the principal amount of such U.S. Global Certificate in an amount equal to the principal amount of the beneficial interest in such U.S. Global Certificate to be transferred, and (B) upon receipt by the Registrar of instructions given in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Offshore Global Certificate in an amount equal to the principal amount of the U.S. Physical Certificate or the U.S. Global Certificate, as the case may be, to be transferred, and the Trustee shall cancel the Physical Certificate, if any, so transferred or decrease the amount of such U.S. Global Certificate. (e) Private Placement Legend. Upon the transfer, exchange or replacement of Certificates not bearing the Private Placement Legend, the Registrar shall deliver Certificates that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Certificates bearing the Private Placement Legend, the Registrar shall deliver only Certificates that bear the Private Placement Legend unless either (i) the circumstances contemplated by paragraph (a)(i)(x) or (e)(ii) of this Section 3.06 exist or (ii) there is delivered to the Registrar an Opinion of Counsel to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act. (f) General. By its acceptance of any Certificate bearing the Private Placement Legend, each Holder of such a Certificate acknowledges the restrictions on transfer of such Certificate set forth in this Agreement and agrees that it will transfer such Certificate only as provided in this Agreement. The Registrar shall not register a transfer of any Certificate unless such transfer complies with the restrictions on transfer of such Certificate set forth in this Agreement. In connection with any transfer of Certificates, each Certificateholder agrees by its acceptance of the Certificates to furnish the Registrar or the Trustee such certifications, legal opinions or other information as either of them may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or a transaction not subject to, 34 28 the registration requirements of the Securities Act; provided that the Registrar shall not be required to determine the sufficiency of any such certifications, legal opinions or other information. Until such time as no Certificates remain Outstanding, the Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 3.05 or this Section 3.06. The Trustee, if not the Registrar at such time, shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar. Section 3.07. Mutilated, Destroyed, Lost or Stolen Certificates. If (a) any mutilated Certificate is surrendered to the Registrar or the Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Certificate and (b) there is delivered to the Registrar and the Trustee such security, indemnity or bond, as may be required by them to save each of them harmless, then, in the absence of notice to the Registrar or the Trustee that such destroyed, lost or stolen Certificate has been acquired by a bona fide purchaser, and provided that the requirements of Section 8-405 of the Uniform Commercial Code in effect in any applicable jurisdiction are met, the Trustee shall execute, authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate or Certificates, in authorized denominations and of like Fractional Undivided Interest and bearing a number not contemporaneously outstanding. In connection with the issuance of any new Certificate under this Section 3.07, the Trustee may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee and the Registrar) connected therewith. Any duplicate Certificate issued pursuant to this Section 3.07 shall constitute conclusive evidence of the appropriate Fractional Undivided Interest in the Trust, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Certificates. Section 3.08. Persons Deemed Owners. Prior to due presentment of a Certificate for registration of transfer, the Trustee, the Registrar and any Paying Agent may treat the Person in whose name any Certificate is registered (as of the day of determination) as the owner of such Certificate for the purpose of receiving distributions pursuant to Article 35 29 IV and for all other purposes whatsoever, and none of the Trustee, the Registrar or any Paying Agent shall be affected by any notice to the contrary. Section 3.09. Cancellation. All Certificates surrendered for payment or transfer or exchange shall, if surrendered to the Trustee or any agent of the Trustee other than the Registrar, be delivered to the Registrar for cancellation and shall promptly be cancelled by it. No Certificates shall be authenticated in lieu of or in exchange for any Certificates cancelled as provided in this Section, except as expressly permitted by this Agreement. All cancelled Certificates held by the Registrar shall be destroyed and a certification of their destruction delivered to the Trustee. Section 3.10. Temporary Certificates. Until definitive Certificates are ready for delivery, the Trustee shall authenticate temporary Certificates. Temporary Certificates shall be substantially in the form of definitive Certificates but may have insertions, substitutions, omissions and other variations determined to be appropriate by the officers executing the temporary Certificates, as evidenced by their execution of such temporary Certificates. If temporary Certificates are issued, the Trustee will cause definitive Certificates to be prepared without unreasonable delay. After the preparation of definitive Certificates, the temporary Certificates shall be exchangeable for definitive Certificates upon surrender of the temporary Certificates at the office or agency of the Trustee designated for such purpose pursuant to Section 7.12, without charge to the Certificateholder. Upon surrender for cancellation of any one or more temporary Certificates, the Trustee shall execute, authenticate and deliver in exchange therefor a like face amount of definitive Certificates of authorized denominations. Until so exchanged, the temporary Certificates shall be entitled to the same benefits under this Agreement as definitive Certificates. Section 3.11. Limitation of Liability for Payments. All payments and distributions made to Certificateholders shall be made only from the Trust Property and only to the extent that the Trustee shall have sufficient income or proceeds from the Trust Property to make such payments in accordance with the terms of Article IV of this Agreement. Each Certificateholder, by its acceptance of a Certificate, agrees that it will look solely to the income and proceeds from the Trust Property for any payment or distribution due to such Certificateholder pursuant to the terms of this Agreement and that it will not have any recourse to the Company, the Trustee, the Loan Trustees, the Liquidity Providers, the Owner Trustees or the Owner Participants, except as otherwise expressly provided herein or in the Intercreditor Agreement. The Company is a party to this Agreement solely for purposes of meeting the requirements of the Trust Indenture Act, and therefore shall not have any right, obligation or liability hereunder (except as otherwise expressly provided herein). 36 30 ARTICLE IV DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS Section 4.01. Certificate Account and Special Payments Account. (a) The Trustee shall establish and maintain on behalf of the Certificateholders a Certificate Account as one or more non-interest-bearing accounts. The Trustee shall hold such Certificate Account in trust for the benefit of the Certificateholders, and shall make or permit withdrawals therefrom only as provided in this Agreement. On each day when a Scheduled Payment is made to the Trustee under the Intercreditor Agreement with respect to the Certificates, the Trustee, upon receipt thereof, shall immediately deposit the aggregate amount of such Scheduled Payment in such Certificate Account. (b) The Trustee shall establish and maintain on behalf of the Certificateholders a Special Payments Account as one or more accounts, which shall be non-interest bearing except as provided in Section 4.04. The Trustee shall hold the Special Payments Account in trust for the benefit of the Certificateholders and shall make or permit withdrawals therefrom only as provided in this Agreement. On each day when one or more Special Payments are made to the Trustee under the Intercreditor Agreement and upon payment of the Special Redemption Premium to the Trustee under the Note Purchase Agreement with respect to the Certificates, the Trustee, upon receipt thereof, shall immediately deposit the aggregate amount of such Special Payments in such Special Payments Account. (c) The Trustee shall present (or, if applicable, cause the Subordination Agent to present) to the related Loan Trustee of each Equipment Note such Equipment Note on the date of its stated final maturity or, in the case of any Equipment Note which is to be redeemed in whole pursuant to the related Indenture, on the applicable redemption date under such Indenture. Section 4.02. Distributions from Certificate Account and Special Payments Account. (a) On each Regular Distribution Date with respect to a series of Certificates or as soon thereafter as the Trustee has confirmed receipt of the payment of all or any part of the Scheduled Payments due on the Equipment Notes held (subject to the Intercreditor Agreement) in the related Trust on such date, the Trustee shall distribute out of the applicable Certificate Account the entire amount deposited therein pursuant to Section 4.01(a). There shall be so distributed to each Certificateholder of record of such series on the Record Date with respect to such Regular Distribution Date (other than as provided in Section 11.01 concerning the final distribution) by check mailed to such Certificateholder, at the address appearing in the Register, such Certificateholder's pro rata share (based on the Fractional Undivided Interest in the Trust held by such Certificateholder) 37 31 of the total amount in the applicable Certificate Account, except that, with respect to Certificates registered on the Record Date in the name of a Clearing Agency (or its nominee), such distribution shall be made by wire transfer in immediately available funds to the account designated by such Clearing Agency (or such nominee). (b) On each Special Distribution Date with respect to any Special Payment with respect to the Certificates or as soon thereafter as the Trustee has confirmed receipt of any Special Payments due on the Equipment Notes held (subject to the Intercreditor Agreement) in the related Trust or realized upon the sale of such Equipment Notes or receipt of the Special Redemption Premium, the Trustee shall distribute out of the applicable Special Payments Account the entire amount of such applicable Special Payment deposited therein pursuant to Section 4.01(b). There shall be so distributed to each Certificateholder of record of such series on the Record Date with respect to such Special Distribution Date (other than as provided in Section 11.01 concerning the final distribution) by check mailed to such Certificateholder, at the address appearing in the Register, such Certificateholder's pro rata share (based on the Fractional Undivided Interest in the related Trust held by such Certificateholder) of the total amount in the applicable Special Payments Account on account of such Special Payment, except that, with respect to Certificates registered on the Record Date in the name of a Clearing Agency (or its nominee), such distribution shall be made by wire transfer in immediately available funds to the account designated by such Clearing Agency (or such nominee). (c) The Trustee shall, at the expense of the Company, cause notice of each Special Payment with respect to a series of Certificates to be mailed to each Certificateholder at his address as it appears in the Register. In the event of redemption or purchase of Equipment Notes held in the related Trust, such notice shall be mailed not less than 15 days prior to the Special Distribution Date for the Special Payment resulting from such redemption or purchase, which Special Distribution Date shall be the date of such redemption or purchase. In the event that any Special Redemption Premium is to be paid by the Company to the Trustee under the Note Purchase Agreement, such notice shall be mailed, together with the notice by the Escrow Paying Agent under Section 2.06 of the Escrow Agreement, not less than 20 days prior to the Special Distribution Date for such amount, which Special Distribution Date shall be the Final Withdrawal Date. In the case of any other Special Payments, such notice shall be mailed as soon as practicable after the Trustee has confirmed that it has received funds for such Special Payment, stating the Special Distribution Date for such Special Payment which shall occur not less than 15 days after the date of such notice and as soon as practicable thereafter. Notices mailed by the Trustee shall set forth: (i) the Special Distribution Date and the Record Date therefor (except as otherwise provided in Section 11.01); 38 32 (ii) the amount of the Special Payment for each $1,000 face amount Certificate and the amount thereof constituting principal, premium, if any, and interest; (iii) the reason for the Special Payment; and (iv) if the Special Distribution Date is the same date as a Regular Distribution Date for the Certificates, the total amount to be received on such date for each $1,000 face amount Certificate. If the amount of (i) premium, if any, payable upon the redemption or purchase of an Equipment Note or (ii) the Special Redemption Premium, if any, has not been calculated at the time that the Trustee mails notice of a Special Payment, it shall be sufficient if the notice sets forth the other amounts to be distributed and states that any premium received will also be distributed. If any redemption of the Equipment Notes held in any Trust is cancelled, the Trustee, as soon as possible after learning thereof, shall cause notice thereof to be mailed to each Certificateholder at its address as it appears on the Register. Section 4.03. Statements to Certificateholders. (a) On each Regular Distribution Date and Special Distribution Date, the Trustee will include with each distribution of a Scheduled Payment or Special Payment, as the case may be, to Certificateholders a statement setting forth the information provided below (in the case of a Special Payment, including any Special Redemption Premium, reflecting in part the information provided by the Escrow Paying Agent under the Escrow Agreement). Such statement shall set forth (per $1,000 aggregate principal amount of Certificate as to (ii), (iii), (iv) and (v) below) the following information: (i) the aggregate amount of funds distributed on such Distribution Date under the Agreement and under the Escrow Agreement, indicating the amount allocable to each source; (ii) the amount of such distribution under this Agreement allocable to principal and the amount allocable to premium (including the Special Redemption Premium), if any; (iii) the amount of such distribution under this Agreement allocable to interest; (iv) the amount of such distribution under the Escrow Agreement allocable to interest; 39 33 (v) the amount of such distribution under the Escrow Agreement allocable to Deposits; and (vi) the Pool Balance and the Pool Factor. With respect to the Certificates registered in the name of a Clearing Agency or its nominee, on the Record Date prior to each Distribution Date, the Trustee will request from the Clearing Agency a securities position listing setting forth the names of all Clearing Agency Participants reflected on the Clearing Agency's books as holding interests in the Certificates on such Record Date. On each Distribution Date, the Trustee will mail to each such Clearing Agency Participant the statement described above and will make available additional copies as requested by such Clearing Agency Participant for forwarding to holders of interests in the Certificates. (b) Within a reasonable period of time after the end of each calendar year but not later than the latest date permitted by law, the Trustee shall furnish to each Person who at any time during such calendar year was a Certificateholder of record a statement containing the sum of the amounts determined pursuant to clauses (a)(i), (a)(ii), (a)(iii), (a)(iv) and (a)(v) above with respect to the related Trust for such calendar year or, in the event such Person was a Certificateholder of record during a portion of such calendar year, for the applicable portion of such year, and such other items as are readily available to the Trustee and which a Certificateholder shall reasonably request as necessary for the purpose of such Certificateholder's preparation of its federal income tax returns. Such statement and such other items shall be prepared on the basis of information supplied to the Trustee by the Clearing Agency Participants and shall be delivered by the Trustee to such Clearing Agency Participants to be available for forwarding by such Clearing Agency Participants to the holders of interests in the Certificates in the manner described in Section 4.03(a). (c) Promptly following (i) the Transfer Date, if there has been any change in the information set forth in clauses (x), (y) and (z) below from that set forth in page 65 of the Offering Memorandum, and (ii) any early redemption or purchase of, or any default in the payment of principal or interest in respect of, any of the Equipment Notes held in the Trust, or any Final Withdrawal, the Trustee shall furnish to Certificateholders of record on such date a statement setting forth (x) the expected Pool Balances for each subsequent Regular Distribution Date following the Transfer Date, (y) the related Pool Factors for such Regular Distribution Dates and (z) the expected principal distribution schedule of the Equipment Notes, in the aggregate, held as Trust Property at the date of such notice. With respect to the Certificates registered in the name of a Clearing Agency, on the Transfer Date, the Trustee will request from such Clearing Agency a securities position listing setting forth the names of all Clearing Agency Participants reflected on such Clearing Agency's books as holding interests in the Certificates on such date. The Trustee will mail to each such Clearing Agency Participant the statement described above and will make available additional 40 34 copies as requested by such Clearing Agency Participant for forwarding to holders of interests in the Certificates. Section 4.04. Investment of Special Payment Moneys. Any money received by the Trustee pursuant to Section 4.01(b) representing a Special Payment which is not distributed on the date received shall, to the extent practicable, be invested in Permitted Investments by the Trustee pending distribution of such Special Payment pursuant to Section 4.02. Any investment made pursuant to this Section 4.04 shall be in such Permitted Investments having maturities not later than the date that such moneys are required to be used to make the payment required under Section 4.02 on the applicable Special Distribution Date and the Trustee shall hold any such Permitted Investments until maturity. The Trustee shall have no liability with respect to any investment made pursuant to this Section 4.04, other than by reason of the willful misconduct or negligence of the Trustee. All income and earnings from such investments shall be distributed on such Special Distribution Date as part of such Special Payment. ARTICLE V THE COMPANY Section 5.01. Maintenance of Corporate Existence. The Company, at its own cost and expense, will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights and franchises, except as otherwise specifically permitted in Section 5.02; provided, however, that the Company shall not be required to preserve any right or franchise if the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company. Section 5.02. Consolidation, Merger, Etc. The Company shall not consolidate with or merge into any other corporation or convey, transfer or lease substantially all of its assets as an entirety to any Person unless: (a) the corporation formed by such consolidation or into which the Company is merged or the Person that acquires by conveyance, transfer or lease substantially all of the assets of the Company as an entirety shall be (i) organized and validly existing under the laws of the United States of America or any state thereof or the District of Columbia, (ii) a "citizen of the United States" as defined in 49 U.S.C. Section 40102(a)(15), as amended, and (iii) a United States certificated air carrier, if and so long as such status is a condition of entitlement to the benefits of Section 1110 of the Bankruptcy Reform Act of 1978, as amended (11 U.S.C. Section 1110), with respect to the Leases or the Aircraft owned by the Company; 41 35 (b) the corporation formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance, transfer or lease substantially all of the assets of the Company as an entirety shall execute and deliver to the Trustee applicable to the Certificates a duly authorized, valid, binding and enforceable agreement in form and substance reasonably satisfactory to the Trustee containing an assumption by such successor corporation or Person of the due and punctual performance and observance of each covenant and condition of the Note Documents and of this Agreement applicable to the Certificates to be performed or observed by the Company; and (c) the Company shall have delivered to the Trustee an Officer's Certificate of the Company and an Opinion of Counsel of the Company reasonably satisfactory to the Trustee, each stating that such consolidation, merger, conveyance, transfer or lease and the assumption agreement mentioned in clause (b) above comply with this Section 5.02 and that all conditions precedent herein provided for relating to such transaction have been complied with. Upon any consolidation or merger, or any conveyance, transfer or lease of substantially all of the assets of the Company as an entirety in accordance with this Section 5.02, the successor corporation or Person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Agreement applicable to the Certificates with the same effect as if such successor corporation or Person had been named as the Company herein. No such conveyance, transfer or lease of substantially all of the assets of the Company as an entirety shall have the effect of releasing any successor corporation or Person which shall have become such in the manner prescribed in this Section 5.02 from its liability in respect of this Agreement and any Note Document applicable to the Certificates to which it is a party. ARTICLE VI DEFAULT Section 6.01. Events of Default. (a) Exercise of Remedies. Upon the occurrence and during the continuation of any Indenture Default under any Indenture, the Trustee may, to the extent it is the Controlling Party at such time (as determined pursuant to the Intercreditor Agreement), direct the exercise of remedies as provided in the Intercreditor Agreement. 42 36 (b) Purchase Rights of Certificateholders. By acceptance of its Certificate, each Certificateholder agrees that at any time after the occurrence and during the continuation of a Triggering Event, (i) each Class B Certificateholder shall have the right to purchase all, but not less than all, of the Certificates upon ten days' written notice to the Trustee and each other Class B Certificateholder, provided that (A) if prior to the end of such ten-day period any other Class B Certificateholder notifies such purchasing Class B Certificateholder that such other Class B Certificateholder wants to participate in such purchase, then such other Class B Certificateholder may join with the purchasing Class B Certificateholder to purchase all, but not less than all, of the Certificates pro rata based on the Fractional Undivided Interest in the Class B Trust held by each such Class B Certificateholder and (B) if prior to the end of such ten-day period any other Class B Certificateholder fails to notify the purchasing Class B Certificateholder of such other Class B Certificateholder's desire to participate in such a purchase, then such other Class B Certificateholder shall lose its right to purchase the Certificates pursuant to this Section 6.01(b); (ii) each Class C Certificateholder shall have the right (which shall not expire upon any purchase of the Certificates pursuant to clause (i) above) to purchase all, but not less than all, of the Certificates and the Class B Certificates upon ten days' written notice to the Trustee, the Class B Trustee and each other Class C Certificateholder, provided that (A) if prior to the end of such ten-day period any other Class C Certificateholder notifies such purchasing Class C Certificateholder that such other Class C Certificateholder wants to participate in such purchase, then such other Class C Certificateholder may join with the purchasing Class C Certificateholder to purchase all, but not less than all, of the Certificates and the Class B Certificates pro rata based on the Fractional Undivided Interest in the Class C Trust held by each such Class C Certificateholder and (B) if prior to the end of such ten-day period any other Class C Certificateholder fails to notify the purchasing Class C Certificateholder of such other Class C Certificateholder's desire to participate in such a purchase, then such other Class C Certificateholder shall lose its right to purchase the Certificates pursuant to this Section 6.01(b); and (iii) each Class D Certificateholder shall have the right (which shall not expire upon any purchase of the Certificates pursuant to clause (i) or (ii) above) to purchase all, but not less than all, of the Certificates, the Class B Certificates and the Class C Certificates upon ten days' written notice to the Trustee, the Class B Trustee, the Class C Trustee and each other Class D Certificateholder, provided that (A) if prior to the end of such ten-day period any other Class D Certificateholder notifies such purchasing Class D Certificateholder that such other Class D Certificateholder wants to participate in such purchase, then such other Class D Certificateholder may 43 37 join with the purchasing Class D Certificateholder to purchase all, but not less than all, of the Certificates, the Class B Certificates and the Class C Certificates pro rata based on the Fractional Undivided Interest in the Class D Trust held by each such Class D Certificateholder and (B) if prior to the end of such ten-day period any other Class D Certificateholder fails to notify the purchasing Class D Certificateholder of such other Class D Certificateholder's desire to participate in such a purchase, then such other Class D Certificateholder shall lose its right to purchase the Certificates pursuant to this Section 6.01(b). The purchase price with respect to the Certificates shall be equal to the Pool Balance of the Certificates, together with accrued and unpaid interest thereon to the date of such purchase, without premium, but including any other amounts then due and payable to the Certificateholders under this Agreement, the Intercreditor Agreement, the Escrow Agreement or any Note Document or on or in respect of the Certificates; provided, however, that (i) if such purchase occurs after the record date specified in Section 2.03(b) of the Escrow Agreement relating to the distribution of unused Deposits and accrued and unpaid interest thereunder, such purchase price shall be reduced by the aggregate amount of unused Deposits and interest to be distributed under the Escrow Agreement (which deducted amounts shall remain distributable to, and may be retained by, the Certificateholder as of such Record Date) and (ii) if such purchase occurs after a Record Date, such purchase price shall be reduced by the amount to be distributed hereunder on the related Distribution Date (which deducted amounts shall remain distributable to, and may be retained by, the Certificateholder as of such Record Date); provided further that no such purchase of Certificates shall be effective unless the purchaser(s) shall certify to the Trustee that contemporaneously with such purchase, such purchaser(s) is purchasing, pursuant to the terms of this Agreement and the Other Agreements, the Certificates, the Class B Certificates and the Class C Certificates which are senior to the securities held by such purchaser(s). Each payment of the purchase price of the Certificates referred to in the first sentence hereof shall be made to an account or accounts designated by the Trustee and each such purchase shall be subject to the terms of this Section 6.01(b). Each Certificateholder agrees by its acceptance of its Certificate that it will, subject to Section 3.04 of this Agreement, upon payment from such Class B Certificateholder(s), Class C Certificateholder(s) or Class D Certificateholder(s), as the case may be, of the purchase price set forth in the first sentence of this paragraph, forthwith sell, assign, transfer and convey to the purchaser(s) thereof (without recourse, representation or warranty of any kind except for its own acts), all of the right, title, interest and obligation of such Certificateholder in this Agreement, the Escrow Agreement, the Deposit Agreement, the Intercreditor Agreement, the Liquidity Facilities, the Note Documents and all Certificates and Escrow Receipts held by such Certificateholder (excluding all right, title and interest under any of the foregoing to the extent such right, title or interest is with respect to an obligation not then due and payable as respects any action or inaction or state of affairs occurring prior to such sale) and the purchaser shall assume all of such Certificateholder's obligations under this Agreement, the Escrow Agreement, the Deposit Agreement, the Intercreditor 44 38 Agreement, the Liquidity Facilities, the Note Documents and all such Certificates and Escrow Receipts. The Certificates will be deemed to be purchased on the date payment of the purchase price is made notwithstanding the failure of the Certificateholders to deliver any Certificates and, upon such a purchase, (i) the only rights of the Certificateholders will be to deliver the Certificates to the purchaser(s) and receive the purchase price for such Certificates and (ii) if the purchaser(s) shall so request, such Certificateholder will comply with all the provisions of Section 3.04 of this Agreement to enable new Certificates to be issued to the purchaser in such denominations as it shall request. All charges and expenses in connection with the issuance of any such new Certificates shall be borne by the purchaser thereof. As used in this Section 6.01, the terms "Class B Certificateholder", "Class B Trust", "Class B Certificate", "Class B Trustee", "Class C Certificate", "Class C Certificateholder", "Class C Trust", "Class C Trustee", "Class D Certificateholder" and "Class D Trust", shall have the respective meanings assigned to such terms in the Intercreditor Agreement. Section 6.02. Incidents of Sale of Equipment Notes. Upon any sale of all or any part of the Equipment Notes held in the Trust made either under the power of sale given under this Agreement or otherwise for the enforcement of this Agreement, the following shall be applicable: (a) Certificateholders and Trustee May Purchase Equipment Notes. Any Certificateholder, the Trustee in its individual or any other capacity or any other Person may bid for and purchase any of the Equipment Notes held in the Trust, and upon compliance with the terms of sale, may hold, retain, possess and dispose of such Equipment Notes in their own absolute right without further accountability. (b) Receipt of Trustee Shall Discharge Purchaser. The receipt of the Trustee making such sale shall be a sufficient discharge to any purchaser for his purchase money, and, after paying such purchase money and receiving such receipt, such purchaser or its personal representative or assigns shall not be obliged to see to the application of such purchase money, or be in any way answerable for any loss, misapplication or nonapplication thereof. (c) Application of Moneys Received upon Sale. Any moneys collected by the Trustee upon any sale made either under the power of sale given by this Agreement or otherwise for the enforcement of this Agreement shall be applied as provided in Section 4.02. Section 6.03. Judicial Proceedings Instituted by Trustee; Trustee May Bring Suit. If there shall be a failure to make payment of the principal of, premium, if any, or 45 39 interest on any Equipment Note held in the Trust, or if there shall be any failure to pay Rent (as defined in the relevant Lease) under any Lease when due and payable, then the Trustee, in, its own name and as trustee of an express trust, as holder of such Equipment Notes, to the extent permitted by and in accordance with the terms of any related Intercreditor Agreement and any related Note Documents (subject to rights of the applicable Owner Trustee or Owner Participant to cure any such failure to pay principal of, premium, if any, or interest on any Equipment Note or to pay Rent under any Lease in accordance with the applicable Indenture), shall be entitled and empowered to institute any suits, actions or proceedings at law, in equity or otherwise, for the collection of the sums so due and unpaid on such Equipment Notes or under such Lease and may prosecute any such claim or proceeding to judgment or final decree with respect to the whole amount of any such sums so due and unpaid. Section 6.04. Control by Certificateholders. Subject to Section 6.03 and the Intercreditor Agreement, the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the related Trust shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee with respect to the Trust or pursuant to the terms of the Intercreditor Agreement, or exercising any trust or power conferred on the Trustee under this Agreement or the Intercreditor Agreement, including any right of the Trustee as Controlling Party under the Intercreditor Agreement or as holder of the Equipment Notes held in the related Trust; provided, however, that (a) such Direction shall not in the opinion of the Trustee be in conflict with any rule of law or with this Agreement and would not involve the Trustee in personal liability or expense, (b) the Trustee shall not determine that the action so directed would be unjustly prejudicial to the Certificateholders not taking part in such Direction, and (c) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such Direction. Section 6.05. Waiver of Past Defaults. Subject to any related Intercreditor Agreement, the Certificateholders holding Certificates of a series evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust (i) may on behalf of all of the Certificateholders waive any past Event of Default hereunder and its consequences or (ii) if the Trustee is the Controlling Party, may direct the Trustee to instruct the applicable Loan Trustee to waive any past Indenture Event of Default under any related Indenture and its consequences, and thereby annul any Direction given by such Certificateholders or the Trustee to such Loan Trustee with respect thereto, except a default: 46 40 (a) in the deposit of any Scheduled Payment or Special Payment under Section 4.01 or in the distribution of any payment under Section 4.02 on the Certificates, or (b) in the payment of the principal of (premium, if any) or interest on the Equipment Notes held in the Trust, or (c) in respect of a covenant or provision hereof which under Article IX hereof cannot be modified or amended without the consent of each Certificateholder holding an Outstanding Certificate of a series affected thereby. Upon any such waiver, such default shall cease to exist with respect to the Certificates and any Event of Default arising therefrom shall be deemed to have been cured for every purpose and any direction given by the Trustee on behalf of the Certificateholders to the relevant Loan Trustee shall be annulled with respect thereto; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Upon any such waiver, the Trustee shall vote the Equipment Notes issued under the relevant Indenture to waive the corresponding Indenture Event of Default. Section 6.06. Right of Certificateholders to Receive Payments Not to Be Impaired. Anything in this Agreement to the contrary notwithstanding, including, without limitation, Section 6.07 hereof, but subject to the Intercreditor Agreement, the right of any Certificateholder to receive distributions of payments required pursuant to Section 4.02 hereof on the applicable Certificates when due, or to institute suit for the enforcement of any such payment on or after the applicable Regular Distribution Date or Special Distribution Date, shall not be impaired or affected without the consent of such Certificateholder. Section 6.07. Certificateholders May Not Bring Suit Except Under Certain Conditions. A Certificateholder shall not have the right to institute any suit, action or proceeding at law or in equity or otherwise with respect to this Agreement, for the appointment of a receiver or for the enforcement of any other remedy under this Agreement, unless: (a) such Certificateholder previously shall have given written notice to the Trustee of a continuing Event of Default; (b) Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than 25% of the related Trust shall have requested the Trustee in writing to institute such action, suit or proceeding and shall have offered to the Trustee indemnity as provided in Section 7.03(e); 47 41 (c) the Trustee shall have refused or neglected to institute any such action, suit or proceeding for 60 days after receipt of such notice, request and offer of indemnity; and (d) no direction inconsistent with such written request shall have been given to the Trustee during such 60-day period by Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust. It is understood and intended that no one or more of the Certificateholders shall have any right in any manner whatsoever hereunder or under the related Trust Supplement or under the Certificates to (i) surrender, impair, waive, affect, disturb or prejudice any property in the Trust Property of the Trust, or the lien of any related Indenture on any property subject thereto, or the rights of the Certificateholders or the holders of the Equipment Notes, (ii) obtain or seek to obtain priority over or preference with respect to any other such Certificateholder or (iii) enforce any right under this Agreement, except in the manner herein provided and for the equal, ratable and common benefit of all the Certificateholders subject to the provisions of this Agreement. Section 6.08. Remedies Cumulative. Every remedy given hereunder to the Trustee or to any of the Certificateholders shall not be exclusive of any other remedy or remedies, and every such remedy shall be cumulative and in addition to every other remedy given hereunder or now or hereafter given by statute, law, equity or otherwise. Section 6.09. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Agreement, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of such suit, and may assess costs against any such party litigant, in the manner and to the extent provided in the Trust Indenture Act; provided, however, that neither this Section 6.09 nor the Trust Indenture Act shall be deemed to authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Company. ARTICLE VII THE TRUSTEE Section 7.01. Certain Duties and Responsibilities. (a) Except during the continuance of an Event of Default in respect of a Trust, the Trustee undertakes to perform such duties in respect of the Trust as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Trustee. 48 42 (b) In case an Event of Default in respect of a Trust has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Agreement in respect of the Trust, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (c) No provision of this Agreement shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that (i) this Subsection shall not be construed to limit the effect of Subsection (a) of this Section 7.01; and (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts. (d) Whether or not herein expressly so provided, every provision of this Agreement relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 7.01. Section 7.02. Notice of Defaults. As promptly as practicable after, and in any event within 90 days after, the occurrence of any default (as such term is defined below) hereunder known to the Trustee, the Trustee shall transmit by mail to the Company, any Owner Trustees, the Owner Participants, the Loan Trustees and the Certificateholders holding Certificates in accordance with Section 313(c) of the Trust Indenture Act, notice of such default hereunder known to the Trustee, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal, premium, if any, or interest on any Equipment Note, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith shall determine that the withholding of such notice is in the interests of the Certificateholders. For the purpose of this Section 7.02 in respect of any Trust, the term "default" means any event that is, or after notice or lapse of time or both would become, an Event of Default in respect of that Trust. Section 7.03. Certain Rights of Trustee. Subject to the provisions of Section 315 of the Trust Indenture Act: (a) the Trustee may rely and shall be protected in acting or refraining from acting in reliance upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or 49 43 document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Request; (c) whenever in the administration of this Agreement or the Intercreditor Agreement, the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officer's Certificate of the Company, any Owner Trustee or any Loan Trustee; (d) the Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement or the Intercreditor Agreement at the Direction of any of the Certificateholders pursuant to this Agreement or the Intercreditor Agreement, unless the Certificateholders shall have offered to the Trustee reasonable security or indemnity against the cost, expenses and liabilities which might be incurred by it in compliance with such Direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document; (g) the Trustee may execute any of the trusts or powers under this Agreement or the Intercreditor Agreement or perform any duties under this Agreement or the Intercreditor Agreement either directly or by or through agents or attorneys, and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it under this Agreement or the Intercreditor Agreement; (h) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the Direction of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust relating to the time, method and place of conducting any proceeding for any remedy available to the 50 44 Trustee, or exercising any trust or power conferred upon the Trustee, under this Agreement or the Intercreditor Agreement; and (i) the Trustee shall not be required to expend or risk its own funds in the performance of any of its duties under this Agreement, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk is not reasonably assured to it. Section 7.04. Not Responsible for Recitals or Issuance of Certificates. The recitals contained herein and in the Certificates, except the certificates of authentication, shall not be taken as the statements of the Trustee, and the Trustee assumes no responsibility for their correctness. Subject to Section 7.15, the Trustee makes no representations as to the validity or sufficiency of this Agreement, any Equipment Notes, the Intercreditor Agreement, the Deposit Agreement, the Escrow Agreement, the Certificates, or any Note Documents, except that the Trustee hereby represents and warrants that this Agreement has been, and the Registration Rights Agreement, each Certificate, the Note Purchase Agreement, the Escrow Agreement and the Intercreditor Agreement will be, executed and delivered by one of its officers who is duly authorized to execute and deliver such document on its behalf. Section 7.05. May Hold Certificates. The Trustee, any Paying Agent, Registrar or any of their Affiliates or any other agent, in their respective individual or any other capacity, may become the owner or pledgee of Certificates and, subject to Sections 310(b) and 311 of the Trust Indenture Act, if applicable, may otherwise deal with the Company, any Owner Trustees or the Loan Trustees with the same rights it would have if it were not Trustee, Paying Agent, Registrar or such other agent. Section 7.06. Money Held in Trust. Money held by the Trustee or the Paying Agent in trust under this Agreement need not be segregated from other funds except to the extent required herein or by law and neither the Trustee nor the Paying Agent shall have any liability for interest upon any such moneys except as provided for herein. Section 7.07. Compensation and Reimbursement. The Company agrees: (a) to pay, or cause to be paid, to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); and (b) to reimburse, or cause to be reimbursed, the Trustee upon its request for all reasonable out- of-pocket expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Agreement or the Intercreditor Agreement (including the reasonable compensation and the expenses and 51 45 disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence, willful misconduct or bad faith or as may be incurred due to the Trustee's breach of its representations and warranties set forth in Section 7.15; and (c) to indemnify the Trustee with respect to the Certificates, pursuant to Section 8.1 of the Owned Aircraft Participation Agreements and Section 9.1 of the Leased Aircraft Participation Agreements, as the case may be. The Trustee shall be entitled to reimbursement from, and shall have a lien prior to the Certificates upon, all property and funds held or collected by the Trustee in its capacity as Trustee for any tax incurred without negligence, bad faith or willful misconduct, on its part, arising out of or in connection with the acceptance or administration of the Trust (other than any tax attributable to the Trustee's compensation for serving as such), including any costs and expenses incurred in contesting the imposition of any such tax. The Trustee shall notify the Company of any claim for any tax for which it may seek reimbursement. If the Trustee reimburses itself from the Trust Property of such Trust for any such tax, it will mail a brief report within 30 days setting forth the amount of such tax and the circumstances thereof to all Certificateholders as their names and addresses appear in the Register. Section 7.08. Corporate Trustee Required; Eligibility. The Trust shall at all times have a Trustee which shall be eligible to act as a trustee under Section 310(a) of the Trust Indenture Act and shall have a combined capital and surplus of at least $75,000,000 (or a combined capital and surplus in excess of $5,000,000 and the obligations of which, whether now in existence or hereafter incurred, are fully and unconditionally guaranteed by a corporation organized and doing business under the laws of the United States, any state or territory thereof or of the District of Columbia and having a combined capital and surplus of at least $75,000,000). If such corporation publishes reports of conditions at least annually, pursuant to law or to the requirements of federal, state, territorial or District of Columbia supervising or examining authority, then for the purposes of this Section 7.08 the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of conditions so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 7.08 to act as Trustee of the Trust, the Trustee shall resign immediately as Trustee of the Trust in the manner and with the effect specified in Section 7.09. Section 7.09. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee of the Trust pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 7.10. 52 46 (b) The Trustee may resign at any time as Trustee of the Trust by giving prior written notice thereof to the Company, the Authorized Agents, the Owner Trustees and the Loan Trustees. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Company, the Owner Trustees and the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by Direction of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in such Trust delivered to the Trustee and to the Company, the Owner Trustees and the Loan Trustees. (d) If at any time in respect of the Trust: (i) the Trustee shall fail to comply with Section 310 of the Trust Indenture Act, if applicable, after written request therefor by the Company or by any Certificateholder who has been a bona fide Certificateholder for at least six months; or (ii) the Trustee shall cease to be eligible under Section 7.08 and shall fail to resign after written request therefor by the Company or by any such Certificateholder; or (iii) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then, in any case, (i) the Company may remove the Trustee or (ii) any Certificateholder who has been a bona fide Certificateholder for at least six months may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee of the Trust. (e) If a Responsible Officer of the Trustee shall obtain actual knowledge of an Avoidable Tax (as defined below) in respect of any Trust which has been or is likely to be asserted, the Trustee shall promptly notify the Company and shall, within 30 days of such notification, resign as Trustee of such Trust hereunder unless within such 30-day period the Trustee shall have received notice that the Company has agreed to pay such tax. The Company shall promptly appoint a successor Trustee of such Trust in a jurisdiction where there are no Avoidable Taxes. As used herein, an "Avoidable Tax" in respect of such Trust means a state or local tax: (i) upon (w) such Trust, (x) such Trust Property, (y) Certificateholders of the Trust or (z) the Trustee for which the Trustee is entitled to seek 53 47 reimbursement from the Trust Property of such Trust, and (ii) which would be avoided if the Trustee were located in another state, or jurisdiction within a state, within the United States of America. A tax shall not be an Avoidable Tax in respect of any Trust if the Company or any Owner Trustee shall agree to pay, and shall pay, such tax. (f) If the Trustee shall resign, be removed or become incapable of acting as Trustee of the Trust or if a vacancy shall occur in the office of the Trustee of the Trust for any cause, the Company shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or other occurrence of such vacancy, a successor Trustee shall be appointed by Direction of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in such Trust delivered to the Company, the Owner Trustees, the Loan Trustee and the retiring Trustee, then the successor Trustee so appointed shall, with the approval of the Company of such appointment, which approval shall not be unreasonably withheld, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed as provided above. If no successor Trustee shall have been so appointed as provided above and accepted appointment in the manner hereinafter provided, the resigning Trustee or any Certificateholder who has been a bona fide Certificateholder of the related series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (g) The successor Trustee shall give notice of the resignation and removal of the Trustee and appointment of the successor Trustee by mailing written notice of such event by first-class mail, postage prepaid, to the Certificateholders as their names and addresses appear in the Register. Each notice shall include the name of such successor Trustee and the address of its Corporate Trust Office. Section 7.10. Acceptance of Appointment by Successor. Every successor Trustee appointed hereunder shall execute and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Company or the successor Trustee, such retiring Trustee shall execute and deliver an instrument transferring to such successor Trustee all such rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all Trust Property held by such retiring Trustee, subject nevertheless to its lien, if any, provided for in Section 7.07. Upon request of any such successor Trustee, the Company, the retiring Trustee and such successor Trustee shall execute and deliver any and all instruments containing such provisions as shall be necessary or desirable to transfer and confirm to, and for more fully and certainly vesting in, such successor Trustee all such rights, powers and trusts. 54 48 No institution shall accept its appointment as a Trustee hereunder unless at the time of such acceptance such institution shall be qualified and eligible under this Article VII. Section 7.11. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder; provided, however, that such corporation shall be otherwise qualified and eligible under this Article VII, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Certificates shall have been executed or authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such execution or authentication and deliver the Certificates so executed or authenticated with the same effect as if such successor Trustee had itself executed or authenticated such Certificates. Section 7.12. Maintenance of Agencies. (a) With respect to each series of Certificates, there shall at all times be maintained an office or agency in the location set forth in Section 12.04 where Certificates may be presented or surrendered for registration of transfer or for exchange, and for payment thereof, and where notices and demands, to or upon the Trustee in respect of such Certificates or this Agreement may be served; provided, however, that, if it shall be necessary that the Trustee maintain an office or agency in another location with respect to the Certificates (e.g., the Certificates shall be represented by Definitive Certificates and shall be listed on a national securities exchange), the Trustee will make all reasonable efforts to establish such an office or agency. Written notice of the location of each such other office or agency and of any change of location thereof shall be given by the Trustee to the Company, any Owner Trustees, the Loan Trustees (in the case of any Owner Trustee or Loan Trustee, at its address specified in the Note Documents or such other address as may be notified to the Trustee) and the Certificateholders. In the event that no such office or agency shall be maintained or no such notice of location or of change of location shall be given, presentations and demands may be made and notices may be served at the Corporate Trust Office of the Trustee. (b) There shall at all times be a Registrar and a Paying Agent hereunder with respect to the Certificates. Each such Authorized Agent shall be a bank or trust company, shall be a corporation organized and doing business under the laws of the United States or any state, with a combined capital and surplus of at least $75,000,000, or a corporation having a combined capital and surplus in excess of $5,000,000, the obligations of which are guaranteed by a corporation organized and doing business under the laws of the United States or any state, with a combined capital and surplus of at least $75,000,000, and shall be authorized under such laws to exercise corporate trust powers, subject to supervision by federal or state authorities. The Trustee shall initially be the Paying Agent and, as 55 49 provided in Section 3.04, Registrar hereunder with respect to the Certificates. Each Registrar shall furnish to the Trustee, at stated intervals of not more than six months, and at such other times as the Trustee may request in writing, a copy of the Register maintained by such Registrar. (c) Any corporation into which any Authorized Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which any Authorized Agent shall be a party, or any corporation succeeding to the corporate trust business of any Authorized Agent, shall be the successor of such Authorized Agent, if such successor corporation is otherwise eligible under this Section 7.12, without the execution or filing of any paper or any further act on the part of the parties hereto or such Authorized Agent or such successor corporation. (d) Any Authorized Agent may at any time resign by giving written notice of resignation to the Trustee, the Company, any Owner Trustees and the Loan Trustees. The Company may, and at the request of the Trustee shall, at any time terminate the agency of any Authorized Agent by giving written notice of termination to such Authorized Agent and to the Trustee. Upon the resignation or termination of an Authorized Agent or in case at any time any such Authorized Agent shall cease to be eligible under this Section 7.12 (when, in either case, no other Authorized Agent performing the functions of such Authorized Agent shall have been appointed), the Company shall promptly appoint one or more qualified successor Authorized Agents, reasonably satisfactory to the Trustee, to perform the functions of the Authorized Agent which has resigned or whose agency has been terminated or who shall have ceased to be eligible under this Section 7.12. The Company shall give written notice of any such appointment made by it to the Trustee, any Owner Trustees and the Loan Trustees; and in each case the Trustee shall mail notice of such appointment to all Certificateholders as their names and addresses appear on the Register for such series. (e) The Company agrees to pay, or cause to be paid, from time to time to each Authorized Agent reasonable compensation for its services and to reimburse it for its reasonable expenses. Section 7.13. Money for Certificate Payments to Be Held in Trust. All moneys deposited with any Paying Agent for the purpose of any payment on Certificates shall be deposited and held in trust for the benefit of the Certificateholders entitled to such payment, subject to the provisions of this Section 7.13. Moneys so deposited and held in trust shall constitute a separate trust fund for the benefit of the Certificateholders with respect to which such money was deposited. The Trustee may at any time, for the purpose of obtaining the satisfaction and discharge of this Agreement or for any other purpose, direct any Paying Agent to pay to the Trustee all sums held in trust by such Paying Agent, such sums to be held by the Trustee 56 50 upon the same trusts as those upon which such sums were held by such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Section 7.14. Registration of Equipment Notes in Trustee's Name. Subject to the provisions of any Intercreditor Agreement, the Trustee agrees that all Equipment Notes to be purchased by any Trust and Permitted Investments, if any, shall be issued in the name of the Trustee as trustee for the applicable Trust or its nominee and held by the Trustee in trust for the benefit of the Certificateholders, or, if not so held, the Trustee or its nominee shall be reflected as the owner of such Equipment Notes or Permitted Investments, as the case may be, in the register of the issuer of such Equipment Notes or Permitted Investments, as the case may be. Section 7.15. Representations and Warranties of Trustee. The Trustee hereby represents and warrants, on the Transfer Date, that: (a) the Trustee is a Delaware banking corporation organized and validly existing in good standing under the laws of the State of Delaware; (b) the Trustee has full power, authority and legal right to receive the Trust Property assigned by the Related Trustee, assume the obligations under, and perform, the Assignment and Assumption Agreement, this Agreement, the Intercreditor Agreement, the Escrow Agreement and the Note Documents and has taken all necessary action to authorize such receipt, assumption and performance by it of this Agreement, the Intercreditor Agreement, the Escrow Agreement and the Note Documents to which it is a party; (c) the receipt of the Trust Property under the Assignment and Assumption Agreement and the performance by the Trustee of the Assignment and Assumption Agreement, this Trust Supplement, the Intercreditor Agreement, the Escrow Agreement and the Note Documents (i) will not violate any provision of any United States federal law or the law of the state of the United States where it is located governing the banking and trust powers of the Trustee or any order, writ, judgment, or decree of any court, arbitrator or governmental authority applicable to the Trustee or any of its assets, (ii) will not violate any provision of the articles of association or by-laws of the Trustee, and (iii) will not violate any provision of, or constitute, with or without notice or lapse of time, a default under, or result in the creation or imposition of any lien on any properties included in the Trust Property pursuant to the provisions of any mortgage, indenture, contract, agreement or other undertaking to which it is a party, which violation, default or lien could reasonably be expected to have an adverse effect on the Trustee's performance or ability to perform its duties hereunder or thereunder or on the transactions contemplated herein or therein; 57 51 (d) the receipt of the Trust Property under the Assignment and Assumption Agreement and the performance by the Trustee of the Assignment and Assumption Agreement, this Agreement, the Intercreditor Agreement, the Escrow Agreement and the Note Documents will not require the authorization, consent, or approval of, the giving of notice to, the filing or registration with, or the taking of any other action in respect of, any governmental authority or agency of the United States or the state of the United States where it is located regulating the banking and corporate trust activities of the Trustee; and (e) The Assignment and Assumption Agreement has been duly executed and delivered by the Trustee and this Agreement, the Intercreditor Agreement, the Escrow Agreement and the Note Documents have been, or will be, as applicable, duly executed and delivered by the Trustee and constitute, or will constitute, as applicable, the legal, valid and binding agreements of the Trustee, enforceable against it in accordance with their respective terms; provided, however, that enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and (ii) general principles of equity. Section 7.16. Withholding Taxes; Information Reporting. As to the Certificates, the Trustee, as trustee of the related grantor trust created by this Agreement, shall exclude and withhold from each distribution of principal, premium, if any, and interest and other amounts due under this Agreement or under the Certificates any and all withholding taxes applicable thereto as required by law. The Trustee agrees to act as such withholding agent and, in connection therewith, whenever any present or future taxes or similar charges are required to be withheld with respect to any amounts payable in respect of the Certificates, to withhold such amounts and timely pay the same to the appropriate authority in the name of and on behalf of the Certificateholders, that it will file any necessary withholding tax returns or statements when due, and that, as promptly as possible after the payment thereof, it will deliver to each such Certificateholder appropriate documentation showing the payment thereof, together with such additional documentary evidence as such Certificateholders may reasonably request from time to time. The Trustee agrees to file any other information reports as it may be required to file under United States law. Section 7.17. Trustee's Liens. The Trustee in its individual capacity agrees that it will, in respect of each Trust created by this Agreement, at its own cost and expense promptly take any action as may be necessary to duly discharge and satisfy in full any mortgage, pledge, lien, charge, encumbrance, security interest or claim ("Trustee's Liens") on or with respect to the Trust Property of such Trust which is attributable to the Trustee either (i) in its individual capacity and which is unrelated to the transactions contemplated by this Agreement, the Intercreditor Agreement, the Note Purchase Agreement or the Note 58 52 Documents or (ii) as Trustee hereunder or in its individual capacity and which arises out of acts or omissions which are not contemplated by this Agreement. Section 7.18. Preferential Collection of Claims. The Trustee shall comply with Section 311(a) of the Trust Indenture Act, excluding any creditor relationship listed in Section 311(b) of the Trust Indenture Act. If the Trustee shall resign or be removed as Trustee, it shall be subject to Section 311(a) of the Trust Indenture Act to the extent provided therein. ARTICLE VIII CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE Section 8.01. The Company to Furnish Trustee with Names and Addresses of Certificateholders. The Company will furnish to the Trustee within 15 days after each Record Date with respect to a Scheduled Payment, and at such other times as the Trustee may request in writing within 30 days after receipt by the Company of any such request, a list, in such form as the Trustee may reasonably require, of all information in the possession or control of the Company as to the names and addresses of the Certificateholders, in each case as of a date not more than 15 days prior to the time such list is furnished; provided, however, that so long as the Trustee is the sole Registrar, no such list need be furnished; and provided further, however, that no such list need be furnished for so long as a copy of the Register is being furnished to the Trustee pursuant to Section 7.12. Section 8.02. Preservation of Information; Communications to Certificateholders. The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Certificateholders contained in the most recent list furnished to the Trustee as provided in Section 7.12 or Section 8.01, as the case may be, and the names and addresses of Certificateholders of each series received by the Trustee in its capacity as Registrar, if so acting. The Trustee may destroy any list furnished to it as provided in Section 7.12 or Section 8.01, as the case may be, upon receipt of a new list so furnished. Section 8.03. Reports by Trustee. Within 60 days after May 15 of each year commencing with the first full year following the issuance of any series of Certificates, the Trustee shall transmit to the Certificateholders, as provided in Section 313(c) of the Trust Indenture Act, a brief report dated as of such May 15, if required by Section 313(a) of the Trust Indenture Act. 59 53 Section 8.04. Reports by the Company. The Company shall: (a) file with the Trustee, within 30 days after the Company is required to file the same with the SEC, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may from time to time by rules and regulations prescribe) which the Company is required to file with the SEC pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934, as amended; or, if the Company is not required to file information, documents or reports pursuant to either of such sections, then to file with the Trustee and the SEC, in accordance with rules and regulations prescribed by the SEC, such of the supplementary and periodic information, documents and reports which may be required pursuant to section 13 of the Securities Exchange Act of 1934, as amended, in respect of a security listed and registered on a national securities exchange as may be prescribed in such rules and regulations; (b) file with the Trustee and the SEC, in accordance with the rules and regulations prescribed by the SEC, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of the Company provided for in this Agreement, as may be required by such rules and regulations, including, in the case of annual reports, if required by such rules and regulations, certificates or opinions of independent public accountants, conforming to the requirements of Section 1.02; (c) transmit to all Certificateholders, in the manner and to the extent provided in Section 313(c) of the Trust Indenture Act such summaries of any information, documents and reports required to be filed by the Company pursuant to subsections (a) and (b) of this Section 8.04 as may be required by rules and regulations prescribed by the SEC; and (d) furnish to the Trustee, not less often than annually, a brief certificate from the principal executive officer, principal financial officer or principal accounting officer as to his knowledge of the Company's compliance with all conditions and covenants under this Agreement (it being understood that for purposes of this paragraph (d), such compliance shall be determined without regard to any period of grace or requirement of notice provided under this Agreement). 60 54 ARTICLE IX SUPPLEMENTAL AGREEMENTS Section 9.01. Supplemental Agreements Without Consent of Certificateholders. Without the consent of the Certificateholders, the Company may (but will not be required to), and the Trustee (subject to Section 9.03) shall, at the Company's request, at any time and from time to time, enter into one or more agreements supplemental hereto or to the Intercreditor Agreement, the Escrow Agreement, the Note Purchase Agreement, the Deposit Agreement or a Liquidity Facility, in form satisfactory to the Trustee, for any of the following purposes: (a) to provide for the formation of a Trust, the issuance of a series of Certificates and other matters contemplated by Section 2.01; or (b) to evidence the succession of another corporation to the Company and the assumption by any such successor of the covenants of the Company herein contained or of the Company's obligations under the Intercreditor Agreement, the Note Purchase Agreement, the Indemnity Agreement or any Liquidity Facility or to evidence the succession of another corporation to the Depositary or any Liquidity Provider and the assumption by any such successor of the obligations of the Depositary or such Liquidity Provider, as the case may be, under the Intercreditor Agreement, the Note Purchase Agreement, the Deposit Agreement, the Indemnity Agreement or any Liquidity Facility; or (c) to add to the covenants of the Company for the benefit of the Certificateholders, or to surrender any right or power conferred upon the Company in this Agreement, the Intercreditor Agreement, the Note Purchase Agreement or any Liquidity Facility; or (d) to correct or supplement any provision in this Agreement, the Intercreditor Agreement, the Escrow Agreement, the Note Purchase Agreement, the Deposit Agreement or any Liquidity Facility which may be defective or inconsistent with any other provision herein or therein or to cure any ambiguity or to modify any other provision with respect to matters or questions arising under this Agreement, the Intercreditor Agreement, the Escrow Agreement, the Note Purchase Agreement, the Deposit Agreement or any Liquidity Facility, provided, however, that any such action shall not materially adversely affect the interests of the Certificateholders; to correct any mistake in this Agreement, the Intercreditor Agreement or any Liquidity Facility; or, as provided in the Intercreditor Agreement, to give effect to or provide for a Replacement Liquidity Facility (as defined in the Intercreditor Agreement); or 61 55 (e) to comply with any requirement of the SEC, any applicable law, rules or regulations of any exchange or quotation system on which the Certificates are listed or of any regulatory body; or (f) to modify, eliminate or add to the provisions of this Agreement, the Intercreditor Agreement or any Liquidity Facility to such extent as shall be necessary to continue the qualification of this Agreement, the Intercreditor Agreement or any Liquidity Facility (including any supplemental agreement) under the Trust Indenture Act or under any similar Federal statute hereafter enacted, and to add to this Agreement, the Intercreditor Agreement or any Liquidity Facility such other provisions as may be expressly permitted by the Trust Indenture Act, excluding, however, the provisions referred to in Section 316(a)(2) of the Trust Indenture Act as in effect at the date as of which this Agreement was executed or any corresponding provision in any similar Federal statute hereafter enacted; or (g) to evidence and provide for the acceptance of appointment under this Agreement, the Intercreditor Agreement or any Liquidity Facility by a successor Trustee and to add to or change any of the provisions of this Agreement, the Intercreditor Agreement or any Liquidity Facility as shall be necessary to provide for or facilitate the administration of the Trust, pursuant to the requirements of Section 7.10; or (h) to provide the information required under Section 7.12 and Section 12.04 as to the Trustee; or (i) to make any other amendments or modifications hereto, provided, however, that such amendments or modifications shall apply to Certificates to be thereafter issued; provided, however, that no such supplemental agreement shall adversely affect the status of any Trust as a grantor trust under Subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as amended, for U.S. federal income tax purposes. Section 9.02. Supplemental Agreements with Consent of Certificateholders. With respect to the Trust and the Certificates, with the consent of the Certificateholders (including consents obtained in connection with a tender offer or exchange offer for the Certificates) evidencing Fractional Undivided Interests aggregating not less than a majority in interest in such Trust, by Direction of said Certificateholders delivered to the Company and the Trustee, the Company may (with the consent of the Owner Trustees, if any, relating to the Certificates, which consent shall not be unreasonably withheld), but shall not be obligated to, and the Trustee (subject to Section 9.03) shall, enter into an agreement or agreements 62 56 supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement, the Intercreditor Agreement, the Escrow Agreement, the Deposit Agreement, the Note Purchase Agreement or any Liquidity Facility to the extent applicable to such Certificateholders or of modifying in any manner the rights and obligations of such Certificateholders under this Agreement, the Intercreditor Agreement, the Escrow Agreement, the Deposit Agreement, the Note Purchase Agreement or any Liquidity Facility; provided, however, that no such agreement shall, without the consent of the Certificateholder of each Outstanding Certificate affected thereby: (a) reduce in any manner the amount of, or delay the timing of, any receipt by the Trustee of payments on the Equipment Notes held in such Trust or distributions that are required to be made herein on any Certificate, or change any date of payment on any Certificate, or change the place of payment where, or the coin or currency in which, any Certificate is payable, or impair the right to institute suit for the enforcement of any such payment or distribution on or after the Regular Distribution Date or Special Distribution Date applicable thereto; or (b) permit the disposition of any Equipment Note included in the Trust Property of such Trust except as permitted by this Agreement, or otherwise deprive such Certificateholder of the benefit of the ownership of the Equipment Notes in such Trust; or (c) alter the priority of distributions specified in the Intercreditor Agreement in a manner materially adverse to the interests of the Certificateholders; or (d) reduce the specified percentage of the aggregate Fractional Undivided Interests of such Trust that is required for any such supplemental agreement, or reduce such specified percentage required for any waiver (of compliance with certain provisions of this Agreement or certain defaults hereunder and their consequences) provided for in this Agreement; or (e) modify any of the provisions of this Section 9.02 or Section 6.05, except to increase any such percentage or to provide that certain other provisions of this Agreement cannot be modified or waived without the consent of the Certificateholder of each Certificate affected thereby; or (f) adversely affect the status of any Trust as a grantor trust under Subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as amended, for U.S. federal income tax purposes. 63 57 It shall not be necessary for any Direction of such Certificateholders under this Section 9.02 to approve the particular form of any proposed supplemental agreement, but it shall be sufficient if such Direction shall approve the substance thereof. Section 9.03. Documents Affecting Immunity or Indemnity. If in the opinion of the Trustee any document required to be executed by it pursuant to the terms of Section 9.01 or 9.02 affects any interest, right, duty, immunity or indemnity in favor of the Trustee under this Agreement or any Trust Supplement, the Trustee may in its discretion decline to execute such document. Section 9.04. Execution of Supplemental Agreements. In executing, or accepting the additional trusts created by, any supplemental agreement permitted by this Article or the modifications thereby of the trusts created by this Agreement, the Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental agreement is authorized or permitted by this Agreement. Section 9.05. Effect of Supplemental Agreements. Upon the execution of any agreement supplemental to this Agreement under this Article, this Agreement shall be modified in accordance therewith, and such supplemental agreement shall form a part of this Agreement for all purposes; and every Certificateholder theretofore or thereafter authenticated and delivered hereunder shall be bound thereby to the extent applicable to such series. Section 9.06. Conformity with Trust Indenture Act. Every supplemental agreement executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. Section 9.07. Reference in Certificates to Supplemental Agreements. Certificates authenticated and delivered after the execution of any supplemental agreement pursuant to this Article may bear a notation in form approved by the Trustee as to any matter provided for in such supplemental agreement; and, in such case, suitable notation may be made upon Outstanding Certificates after proper presentation and demand. ARTICLE X AMENDMENTS TO INDENTURE AND NOTE DOCUMENTS Section 10.01. Amendments and Supplements to Indenture and Other Note Documents. In the event that the Trustee, as holder (or beneficial owner through the Subordination Agent) of any Equipment Notes (or as a prospective purchaser of any 64 58 Postponed Notes) in trust for the benefit of the Certificateholders or as Controlling Party under an Intercreditor Agreement, receives (directly or indirectly through the Subordination Agent) a request for a consent to any amendment, modification, waiver or supplement under any Indenture, other Note Document or any other related document, which request would require the consent of Certificateholders under Section 9.02 hereof, the Trustee shall forthwith send a notice of such proposed amendment, modification, waiver or supplement to each Certificateholder registered on the Register as of the date of such notice. The Trustee shall request from the Certificateholders a Direction as to (a) whether or not to take or refrain from taking (or direct the Subordination Agent to take or refrain from taking) any action which a holder of (or, with respect to Postponed Notes, a prospective purchaser of) such Equipment Note or a Controlling Party has the option to direct, (b) whether or not to give or execute (or direct the Subordination Agent to give or execute) any waivers, consents, amendments, modifications or supplements as a holder of (or, with respect to Postponed Notes, a prospective purchaser of) such Equipment Note or as Controlling Party and (c) how to vote (or direct the Subordination Agent to vote) any Equipment Note (or, with respect to a Postponed Note, its commitment to acquire such Postponed Note) if a vote has been called for with respect thereto. Provided such a request for Certificateholder Direction shall have been made, in directing any action or casting any vote or giving any consent as the holder of any Equipment Note (or in directing the Subordination Agent in any of the foregoing), (i) other than as Controlling Party, the Trustee shall vote for or give consent to any such action with respect to such Equipment Note (or Postponed Note) in the same proportion as that of (A) the aggregate face amounts of all Certificates actually voted in favor of or for giving consent to such action by such Direction of Certificateholders to (B) the aggregate face amount of all Outstanding Certificates and (ii) as Controlling Party, the Trustee shall vote as directed in such Certificateholder Direction by the Certificateholders evidencing a Fractional Undivided Interest aggregating not less than a majority in interest in the Trust. For purposes of the immediately preceding sentence, a Certificate shall have been "actually voted" if the Holder of such Certificate has delivered to the Trustee an instrument evidencing such Holder's consent to such Direction prior to one Business Day before the Trustee directs such action or casts such vote or gives such consent. Notwithstanding the foregoing, but subject to Section 6.04 and any Intercreditor Agreement, the Trustee may, with respect to the Certificates, in its own discretion and at its own direction, consent and notify the relevant Loan Trustee of such consent (or direct the Subordination Agent to consent and notify the Loan Trustee of such consent) to any amendment, modification, waiver or supplement under any related Indenture or any other related Note Document if an Event of Default hereunder shall have occurred and be continuing or if such amendment, modification, waiver or supplement will not materially adversely affect the interests of the Certificateholders. 65 59 ARTICLE XI TERMINATION OF TRUSTS Section 11.01. Termination of the Trust. The respective obligations and responsibilities of the Company and the Trustee shall terminate upon the distribution to all Certificateholders and the Trustee of all amounts required to be distributed to them pursuant to this Agreement and the disposition of all property held as part of the Trust Property; provided, however, that in no event shall the Trust continue beyond one hundred ten (110) years following the date of the execution of this Agreement. Notice of any termination, specifying the Distribution Date upon which the Certificateholders may surrender their Certificates to the Trustee for payment of the final distribution and cancellation, shall be mailed promptly by the Trustee to Certificateholders not earlier than the 60th day and not later than the 15th day next preceding such final Distribution Date specifying (A) the Distribution Date upon which the proposed final payment of the Certificates will be made upon presentation and surrender of Certificates at the office or agency of the Trustee therein specified, (B) the amount of any such proposed final payment, and (c) that the Record Date otherwise applicable to such Distribution Date is not applicable, payments being made only upon presentation and surrender of the Certificates at the office or agency of the Trustee therein specified. The Trustee shall give such notice to the Registrar at the time such notice is given to Certificateholders. Upon presentation and surrender of the Certificates in accordance with such notice, the Trustee shall cause to be distributed to Certificateholders such final payments. In the event that all of the Certificateholders shall not surrender their Certificates for cancellation within six months after the date specified in the above-mentioned written notice, the Trustee shall give a second written notice to the remaining Certificateholders to surrender their Certificates for cancellation and receive the final distribution with respect thereto. No additional interest shall accrue on the Certificates after the Distribution Date specified in the first written notice. In the event that any money held by the Trustee for the payment of distributions on the Certificates shall remain unclaimed for two years (or such lesser time as the Trustee shall be satisfied, after sixty days' notice from the Company, is one month prior to the escheat period provided under applicable law) after the final distribution date with respect thereto, the Trustee shall pay to each Loan Trustee the appropriate amount of money relating to such Loan Trustee and shall give written notice thereof to the related Owner Trustees, the Owner Participants and the Company. 66 60 ARTICLE XII MISCELLANEOUS PROVISIONS Section 12.01. Limitation on Rights of Certificateholders. The death or incapacity of any Certificateholder shall not operate to terminate this Agreement or the Trust, nor entitle such Certificateholder's legal representatives or heirs to claim an accounting or to take any action or commence any proceeding in any court for a partition or winding up of the Trust, nor otherwise affect the rights, obligations, and liabilities of the parties hereto or any of them. Section 12.02. Liabilities of Certificateholders. Neither the existence of the Trust nor any provision in this Agreement is intended to or shall limit the liability the Certificateholders would otherwise incur if the Certificateholders owned Trust Property as co-owners, or incurred any obligations of the Trust, directly rather than through the Trust. Section 12.03. Registration of Equipment Notes in Name of Subordination Agent. If the Trust is party to the Intercreditor Agreement, the Trustee agrees that all Equipment Notes to be purchased by such Trust shall be issued in the name of the Subordination Agent under the Intercreditor Agreement or its nominee and held by such Subordination Agent in trust for the benefit of the Certificateholders, or, if not so held, such Subordination Agent or its nominee shall be reflected as the owner of such Equipment Notes in the register of the issuer of such Equipment Notes. Section 12.04. Notices. (a) Unless otherwise specifically provided herein, all notices required under the terms and provisions of this Agreement shall be in English and in writing, and any such notice may be given by United States mail, courier service or telecopy, and any such notice shall be effective when delivered or received or, if mailed, three days after deposit in the United States mail with proper postage for ordinary mail prepaid, (i) if to the Company: Atlas Air, Inc. 538 Commons Drive Golden, CO 80401 Attention: Chief Financial Officer Facsimile: (303) 526-5051 (ii) if to the Trustee: Wilmington Trust Company One Rodney Square 67 61 1100 N. Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Department Facsimile: (302) 651-8882 (b) The Company or the Trustee, by notice to the other, may designate additional or different addresses for subsequent notices or communications. (c) Any notice or communication to Certificateholders shall be mailed by first-class mail to the addresses for Certificateholders shown on the Register kept by the Registrar and to addresses filed with the Trustee for Certificate Owners. Failure so to mail a notice or communication or any defect in such notice or communication shall not affect its sufficiency with respect to other Certificateholders or Certificate Owners. (d) If a notice or communication is mailed in the manner provided above within the time prescribed, it is conclusively presumed to have been duly given, whether or not the addressee receives it. (e) If the Company mails a notice or communication to the Certificateholders, it shall mail a copy to the Trustee and to each Paying Agent for such series at the same time. (f) Notwithstanding the foregoing, all communications or notices to the Trustee shall be deemed to be given only when received by a Responsible Officer of the Trustee. (g) The Trustee shall promptly furnish the Company with a copy of any demand, notice or written communication received by the Trustee hereunder from any Certificateholder, Owner Trustee or Loan Trustee. Section 12.05. Governing Law. THIS AGREEMENT HAS BEEN DELIVERED IN THE STATE OF NEW YORK AND, TOGETHER WITH THE CERTIFICATES, SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. Section 12.06. Severability of Provisions. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions, or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of 68 62 this Agreement or the Trust, or of the Certificates or the rights of the Certificateholders thereof. Section 12.07. Trust Indenture Act Controls. Upon the occurrence of any Registration Event, this Agreement shall become subject to the provisions of the Trust Indenture Act and shall, to the extent applicable, be governed by such provisions. From and after any Registration Event, if any provision of this Agreement limits, qualifies or conflicts with another provision which is required to be included in this Agreement by the Trust Indenture Act, the required provision shall control. Section 12.08. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. Section 12.09. Successors and Assigns. All covenants, agreements, representations and warranties in this Agreement by the Trustee and the Company shall bind and, to the extent permitted hereby, shall inure to the benefit of and be enforceable by their respective successors and assigns, whether so expressed or not. Section 12.10. Benefits of Agreement. Nothing in this Agreement or in the Certificates, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, and the Certificateholders, any benefit or any legal or equitable right, remedy or claim under this Agreement. Section 12.11. Legal Holidays. In any case where any Regular Distribution Date or Special Distribution Date relating to any Certificate shall not be a Business Day, then (notwithstanding any other provision of this Agreement) payment need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on such Regular Distribution Date or Special Distribution Date, and no interest shall accrue during the intervening period. Section 12.12. Counterparts. For the purpose of facilitating the execution of this Agreement and for other purposes, this Agreement may be executed simultaneously in any number of counterparts, each of which counterparts shall be deemed to be an original, and all of which counterparts shall constitute but one and the same instrument. Section 12.13. Communication by Certificateholders with Other Certificateholders. Certificateholders may communicate with other Certificateholders with respect to their rights under this Agreement or the Certificates pursuant to Section 312(b) of the Trust Indenture Act. The Company, the Trustee and any and all other persons benefitted by this Agreement shall have the protection afforded by Section 312(c) of the Trust Indenture Act. 69 63 Section 12.14. Intention of Parties. The parties hereto intend that each Trust be classified for U.S. federal income tax purposes as a grantor trust under Subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as amended, and not as a trust or association taxable as a corporation or as a partnership. The Trustee agrees to hold all assets of each Trust for investment purposes only. Each Certificateholder and Investor, by its acceptance of its Certificate or a beneficial interest therein, agrees to treat the Trust as a grantor trust for all U.S. federal, state and local income tax purposes. The powers granted and obligations undertaken pursuant to this Agreement shall be so construed so as to further such intent. 70 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed by their respective officers hereunto duly authorized as of the day and year first written above. ATLAS AIR, INC. By: /s/ RICHARD H. SHUYLER ----------------------------------------- Name: Richard H. Shuyler Title: Chief Financial Officer, Sr. Vice Pres., Finance; and Corporate Treasurer WILMINGTON TRUST COMPANY, as Trustee By: /s/ JAMES P. LAWLER ----------------------------------------- Name: JAMES P. LAWLER Title: Vice President EX-10.92 6 PASS THROUGH TRUST AGREEMENT 1998-1B-O 1 EXHIBIT 10.92 EXECUTION COPY - -------------------------------------------------------------------------------- PASS THROUGH TRUST AGREEMENT Dated as of February 9, 1998 between ATLAS AIR, INC. and WILMINGTON TRUST COMPANY as Trustee $115,481,000 Atlas Air Pass Through Trust 1998-1B-O 7.68% Atlas Air 1998-1B-O Initial Pass Through Certificates 7.68% Atlas Air 1998-1B-O Exchange Pass Through Certificates - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 1.02. Compliance Certificates and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 1.03. Form of Documents Delivered to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 1.04. Directions of Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE II ORIGINAL ISSUANCE OF CERTIFICATES: ACQUISITION OF TRUST PROPERTY Section 2.01. Delivery of Documents; Delivery Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 2.02. Withdrawal of Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 2.03. Acceptance by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 2.04. Limitation of Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 ARTICLE III THE CERTIFICATES Section 3.01. Title, Form, Denomination and Execution of Certificates . . . . . . . . . . . . . . . . . . . . . 20 Section 3.02. Restrictive Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 3.03. Authentication of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 3.04. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 3.05. Book-Entry Provisions for U.S. Global Certificate and Offshore Global Certificates . . . . . . . . 25 Section 3.06. Special Transfer Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Section 3.07. Mutilated, Destroyed, Lost or Stolen Certificates . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 3.08. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 3.09. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 3.10. Temporary Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 3.11. Limitation of Liability for Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
iii 3 Page ---- ARTICLE IV DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS Section 4.01. Certificate Account and Special Payments Account . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 4.02. Distributions from Certificate Account and Special Payments Account . . . . . . . . . . . . . . . 32 Section 4.03. Statements to Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Section 4.04. Investment of Special Payment Moneys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 ARTICLE V THE COMPANY Section 5.01. Maintenance of Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Section 5.02. Consolidation, Merger, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 ARTICLE VI DEFAULT Section 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 6.02. Incidents of Sale of Equipment Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Section 6.03. Judicial Proceedings Instituted by Trustee; Trustee May Bring Suit . . . . . . . . . . . . . . . . 40 Section 6.04. Control by Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Section 6.05. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Section 6.06. Right of Certificateholders to Receive Payments Not to Be Impaired . . . . . . . . . . . . . . . . 42 Section 6.07. Certificateholders May Not Bring Suit Except Under Certain Conditions . . . . . . . . . . . . . . 42 Section 6.08. Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Section 6.09. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 ARTICLE VII THE TRUSTEE Section 7.01. Certain Duties and Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Section 7.02. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Section 7.03. Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Section 7.04. Not Responsible for Recitals or Issuance of Certificates . . . . . . . . . . . . . . . . . . . . . 45 Section 7.05. May Hold Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 7.06. Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 7.07. Compensation and Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
iv 4 Page ---- Section 7.08. Corporate Trustee Required; Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Section 7.09. Resignation and Removal; Appointment of Successor . . . . . . . . . . . . . . . . . . . . . . . . 47 Section 7.10. Acceptance of Appointment by Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Section 7.11. Merger, Conversion, Consolidation or Succession to Business . . . . . . . . . . . . . . . . . . . 49 Section 7.12. Maintenance of Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Section 7.13. Money for Certificate Payments to Be Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . 51 Section 7.14. Registration of Equipment Notes in Trustee's Name . . . . . . . . . . . . . . . . . . . . . . . . 51 Section 7.15. Representations and Warranties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Section 7.16. Withholding Taxes; Information Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Section 7.17. Trustee's Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Section 7.18. Preferential Collection of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 ARTICLE VIII CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE Section 8.01. The Company to Furnish Trustee with Names and Addresses of Certificateholders . . . . . . . . . . 54 Section 8.02. Preservation of Information; Communications to Certificateholders . . . . . . . . . . . . . . . . 54 Section 8.03. Reports by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Section 8.04. Reports by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 ARTICLE IX SUPPLEMENTAL AGREEMENTS Section 9.01. Supplemental Agreements Without Consent of Certificateholders . . . . . . . . . . . . . . . . . . 55 Section 9.02. Supplemental Agreements with Consent of Certificateholders . . . . . . . . . . . . . . . . . . . . 57 Section 9.03. Documents Affecting Immunity or Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 9.04. Execution of Supplemental Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 9.05. Effect of Supplemental Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 9.06. Conformity with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Section 9.07. Reference in Certificates to Supplemental Agreements . . . . . . . . . . . . . . . . . . . . . . . 59 ARTICLE X AMENDMENTS TO INDENTURE AND NOTE DOCUMENTS Section 10.01. Amendments and Supplements to Indenture and Other Note Documents . . . . . . . . . . . . . . . . 59
v 5 Page ---- ARTICLE XI TERMINATION OF TRUSTS Section 11.01. Termination of the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 ARTICLE XII MISCELLANEOUS PROVISIONS Section 12.01. Limitation on Rights of Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Section 12.02. Liabilities of Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Section 12.03. Registration of Equipment Notes in Name of Subordination Agent . . . . . . . . . . . . . . . . . 63 Section 12.04. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Section 12.05. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Section 12.06. Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Section 12.07. Trust Indenture Act Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.08. Effect of Headings and Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.09. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.10. Benefits of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.11. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.12. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.13. Communication by Certificateholders with Other Certificateholders . . . . . . . . . . . . . . . . 65 Section 12.14. Intention of Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Exhibit A - Form of Certificate Exhibit B - Form of Certificate for Unlegended Certificates Exhibit C - Form of Certificate To Be Delivered in Connection with Transfers Pursuant to Regulation S Exhibit D - Form of Certificate To Be Delivered in Connection with Transfers to Non-QIB Accredited Investors Exhibit E - Form of Assignment and Assumption Agreement
vi 6 Reconciliation and tie between Atlas Air Pass Through Trust Agreement, dated as of February 9, 1998 and the Trust Indenture Act of 1939. This reconciliation does not constitute part of the Pass Through Trust Agreement.
Trust Indenture Act Pass Through Trust of 1939 Section Agreement Section ------------------------------------------------- --------------------- 310(a)(1) 7.07 (a)(2) 7.07 312(a) 3.05; 8.01; 8.02 313(a) 7.07 314(a) 8.04(a) - (c) (a)(4) 8.04(d) (c)(1) 1.02 (c)(2) 1.02 (d)(1) 7.13; 11.01 (d)(2) 7.13; 11.01 (d)(3) 2.01 (e) 1.02 315(b) 7.02 316(a)(last sentence) 1.01(c) (a)(1)(A) 6.04 (a)(1)(B) 6.05 (b) 6.06 (c) 1.04(d) 317(a)(1) 6.03 (b) 7.13 318(a) 12.05
ii 7 PASS THROUGH TRUST AGREEMENT This PASS THROUGH TRUST AGREEMENT, dated as of February 9, 1998 (as the same may be amended, supplemented or modified from time to time, this "Agreement"), between ATLAS AIR, INC., a Delaware corporation (the "Company"), and WILMINGTON TRUST COMPANY, a Delaware trust company, as Trustee, is made with respect to the formation of Atlas Air Pass Through Trust 1998-1B-O and the issuance of 7.68% Atlas Air 1998-1B-O Initial Pass Through Certificates representing fractional undivided interests in the Trust. W I T N E S S E T H: WHEREAS, the Company has obtained commitments from Boeing (such term and certain other capitalized terms used herein are defined below) for the delivery of certain Aircraft; WHEREAS, the Company intends to finance the acquisition of each such Aircraft either (i) through separate leveraged lease transactions, in which case the Company will lease such Aircraft (collectively, the "Leased Aircraft") or (ii) through separate secured loan transactions, in which case the Company will own such Aircraft (collectively, the "Owned Aircraft"); WHEREAS, in the case of each Leased Aircraft, each Owner Trustee, acting on behalf of the corresponding Owner Participant, will issue pursuant to an Indenture, on a non-recourse basis, Equipment Notes in order to finance a portion of its purchase price of such Leased Aircraft; WHEREAS, in the case of each Owned Aircraft, the Company will issue pursuant to an Indenture, on a recourse basis, Equipment Notes to finance a portion of the purchase price of such Owned Aircraft; WHEREAS, the Trustee hereby declares the creation of this Atlas Air Pass Through Trust 1998-1B (the "Trust") for the benefit of the Certificateholders, and the initial Certificateholders as the grantors of the Trust, by their respective acceptances of the Certificates, join in the creation of the Trust with the Trustee; WHEREAS, all Certificates to be issued by the Trust will evidence fractional undivided interests in the Trust and will convey no rights, benefits or interests in respect of any property other than the Trust Property except for those Certificates to which an Escrow Receipt has been affixed; WHEREAS, the Escrow Agent and the Placement Agents have contemporaneously herewith entered into an Escrow Agreement with the Escrow Paying Agent pursuant to which the Placement Agents have delivered to the Escrow Agent the 8 2 proceeds from the sale of the Certificates and have irrevocably instructed the Escrow Paying Agent to withdraw and pay funds from such proceeds upon request and proper certification by the Trustee to purchase Equipment Notes as the Aircraft are delivered by Boeing under the Aircraft Purchase Agreement from time to time prior to the Delivery Period Termination Date; WHEREAS, the Escrow Agent on behalf of the Certificateholders has contemporaneously herewith entered into a Deposit Agreement with the Depositary under which the Deposits referred to therein will be made and from which it will withdraw funds to allow the Trustee to purchase Equipment Notes from time to time prior to the Delivery Period Termination Date; WHEREAS, pursuant to the terms and conditions of this Agreement and the Note Purchase Agreement, upon or shortly following delivery of an Aircraft, the Trustee on behalf of the Trust, using funds withdrawn under the Escrow Agreement, shall purchase one or more Equipment Notes having the same interest rate as, and final maturity date not later than the final Regular Distribution Date of, the Certificates issued hereunder and shall hold such Equipment Notes in trust for the benefit of the Certificateholders; WHEREAS, to facilitate the sale of Equipment Notes to, and the purchase of Equipment Notes by, the Trustee on behalf of the Trust, the Company has duly authorized the execution and delivery of this Agreement as the "issuer", as such term is defined in and solely for purposes of the Securities Act, of the Certificates to be issued pursuant hereto and as the "obligor", as such term is defined in and solely for purposes of the Trust Indenture Act of 1939, as amended, with respect to all such Certificates and is undertaking to perform certain administrative and ministerial duties hereunder and is also undertaking to pay the ongoing fees and expenses of the Trustee; WHEREAS, all of the conditions and requirements necessary to make this Agreement, when duly executed and delivered, a valid, binding and legal instrument in accordance with its terms and for the purposes herein expressed, have been done, performed and fulfilled, and the execution and delivery of this Agreement in the form and with the terms hereof have been in all respects duly authorized; WHEREAS, upon issuance of the Exchange Certificates, if any, or the effectiveness of the Shelf Registration Statement, this Agreement as amended or supplemented from time to time, will be subject to the provisions of the Trust Indenture Act of 1939, as amended, and shall, to the extent applicable, be governed by such provisions; NOW, THEREFORE, in consideration of the mutual agreements herein contained, and of other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 9 3 ARTICLE I DEFINITIONS Section 1.01. Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms used herein that are defined in this Article I have the meanings assigned to them in this Article I, and include the plural as well as the singular; (b) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, or by the rules promulgated under the Trust Indenture Act, have the meanings assigned to them therein; (c) all references in this Agreement to designated "Articles", "Sections", "Subsections" and other subdivisions are to the designated Articles, Sections, Subsections and other subdivisions of this Agreement; (d) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section, Subsection or other subdivision; and (e) unless the context otherwise requires, whenever the words "including" "include" or "includes" are used herein, it shall be deemed to be followed by the phrase "without limitation". "Act" has the meaning, with respect to any Certificateholder, specified in Section 1.04(a). "Affiliate" means, with respect to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person. For the purposes of this definition, "control", when used with respect to any specified Person, means the power, directly or indirectly, to direct the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agent Members" has the meaning specified in Section 3.05(a). "Agreement" has the meaning specified in the recitals hereto. 10 4 "Aircraft" means each of the Aircraft or Substitute Aircraft in respect of which a Participation Agreement is entered into in accordance with the Note Purchase Agreement. "Applicable Delivery Date" has the meaning specified in Section 2.01(b). "Applicable Participation Agreement" has the meaning specified in Section 2.01(b). "Assignment and Assumption Agreement" means the assignment and assumption agreement substantially in the form of Exhibit E hereto executed and delivered in accordance with Section 11.01. "Authorized Agent" means, with respect to the Certificates, any Paying Agent or Registrar for the Certificates. "Avoidable Tax" has the meaning set forth in Section 7.09(e). "Boeing" means The Boeing Company. "Business Day" means, with respect to the Certificates, any day other than a Saturday, a Sunday or a day on which commercial banks are required or authorized to close in Denver, Colorado, New York, New York, Chicago, Illinois or, so long as any Certificate is outstanding, the city and state in which the Trustee or any related Loan Trustee maintains its Corporate Trust Office or receives and disburses funds. "Certificate" means any one of the Initial Certificates or Exchange Certificates and any such Certificates issued in exchange therefor or replacement thereof pursuant to this Agreement. "Certificate Account" means, with respect to the Certificates, the account or accounts created and maintained for such series pursuant to Section 4.01(a). "Certificateholder" or "Holder" means the Person in whose name a Certificate is registered in the Register for Certificates. "Clearing Agency" means an organization registered as a "clearing agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as amended. "Clearing Agency Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects, 11 5 directly or indirectly, book-entry transfers and pledges of securities deposited with the Clearing Agency. "Company" means Atlas Air, Inc., a Delaware corporation, or its successor in interest pursuant to Section 5.02, or (only in the context of provisions hereof, if any, when such reference is required for purposes of compliance with the Trust Indenture Act) any other "obligor" (within the meaning of the Trust Indenture Act) with respect to the Certificates. "Controlling Party" means the Person entitled to act as such pursuant to the terms of the Intercreditor Agreement. "Corporate Trust Office" means, with respect to the Trustee or any Loan Trustee, the office of such trustee in the city at which at any particular time its corporate trust business shall be principally administered. "Cut-off Date" means the earlier of (a) the Delivery Period Termination Date and (b) the date on which a Triggering Event occurs. "Delivery Period Termination Date" means June 30, 1999; provided, that if a labor strike or work stoppage occurs at The Boeing Company prior to such date, such date shall be extended by adding thereto the number of days that each such labor strike or work stoppage continues in effect. "Direction" has the meaning specified in Section 1.04(a). "Equipment Notes" means all of the equipment notes issued under the Indentures. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor federal statute. "Escrow Account" has the meaning specified in Section 2.02(b). "Escrow Agent" means, initially, First Security, National Association, and any replacement or successor therefor appointed in accordance with the Escrow Agreement. "Escrow Agreement" means the Escrow and Paying Agent Agreement dated as of February 9, 1998 relating to the Certificates, among the Escrow Agent, the Escrow Paying Agent, the Trustee and Placement Agents, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. 12 6 "Escrow Paying Agent" means the Person acting as paying agent under the Escrow Agreement. "Escrow Receipt" means the receipt substantially in the form annexed to the Escrow Agreement representing a fractional undivided interest in the funds held in escrow thereunder. "Escrowed Funds" has the meaning specified in Section 2.02(b). "Event of Default" means an Indenture Event of Default under any Indenture pursuant to which Equipment Notes held by such Trust were issued. "Exchange Certificates" means the certificates substantially in the form of Exhibit A hereto issued in exchange for the Certificates pursuant to the Registration Rights Agreement and authenticated hereunder. "Final Withdrawal Notice" has the meaning specified in Section 2.02. "Fractional Undivided Interest" means the fractional undivided interest in a Trust that is evidenced by a Certificate. "Global Certificates" has the meaning specified in Section 3.01(d). "Indenture" means each of the separate trust indentures and mortgages relating to the Aircraft, each as specified or described in a Delivery Notice delivered pursuant to the Note Purchase Agreement or the related Participation Agreement, in each case as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Indenture Event of Default" means, with respect to any Indenture, any Indenture Event of Default (as such term is defined in such Indenture). "Initial Regular Distribution Date" means, with respect to the Certificates, the first Regular Distribution Date on which a Scheduled Payment is to be made. "Institutional Accredited Investor" means an institutional investor that is an "accredited investor" within the meaning set forth in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act. "Intercreditor Agreement" means the Intercreditor Agreement dated as of February 9, 1998 among the Trustee, the Other Trustees, the Liquidity Providers, the liquidity providers relating to the Certificates issued under (and as defined in) each of 13 7 the Other Pass Through Trust Agreements, and Wilmington Trust Company, as Subordination Agent and as trustee thereunder, as amended, supplemented or otherwise modified from time to time in accordance with its terms. "Issuance Date" means, with respect to the Certificates, the date of the issuance of such Certificates. "Investors" means the Placement Agents together with all subsequent beneficial owners of the Certificates. "Lease" means, with respect to each Leased Aircraft, any lease between an Owner Trustee, as the lessor, and the Company, as the lessee, referred to in the related Indenture, as such lease may be amended, supplemented or otherwise modified in accordance with its terms; and "Leases" means all such Leases. "Leased Aircraft" has the meaning specified in the recitals hereto. "Leased Aircraft Participation Agreement" means any participation agreement substantially in the form of Exhibit A-1 to the Note Purchase Agreement, as the same may be amended, supplemented or otherwise modified in accordance with its terms. "Letter of Representations" means, with respect to the Certificates, an agreement among the Company, the Trustee and the initial Clearing Agency. "Liquidity Facility" means, with respect to the Certificates, any revolving credit agreement, letter of credit or similar facility relating to the Certificates between a bank or other financial institution and a Subordination Agent, as amended, replaced, supplemented or otherwise modified from time to time in accordance with its terms and the terms of any Intercreditor Agreement. "Liquidity Provider" means, with respect to the Certificates, a bank or other financial institution that agrees to provide a Liquidity Facility for the benefit of the holders of Certificates. "Loan Trustee" means, with respect to any Equipment Note or the Indenture applicable thereto, the bank or trust company designated as loan or indenture trustee under such Indenture, and any successor to such Loan Trustee as such trustee; and "Loan Trustees" means all of the Loan Trustees under the Indentures. "Non-U.S. Person" means a Person that is not a "U.S. person", as defined in Regulation S. 14 8 "Note Documents" means, with respect to the Certificates, the Equipment Notes with respect to such Certificates and, with respect to such Equipment Notes, the related Indenture, Note Purchase Agreement and, if the related Aircraft is leased to the Company, the related Lease and the related Owner Trustee's Purchase Agreement. "Note Purchase Agreement" means, with respect to the Certificates, any note purchase, refunding, participation or similar agreement providing for, among other things, the purchase of Equipment Notes by the Trustee on behalf of the relevant Trust; and "Note Purchase Agreements" means all such agreements. "Offering Memorandum" means the Offering Memorandum dated January 27, 1998 relating to the offering of the Certificates and the certificates offered under the Other Pass Through Trust Agreements. "Officer's Certificate" means a certificate signed, (a) in the case of the Company, by the Chairman or Vice Chairman of the Board of Directors, the President, any Vice President or the Treasurer of the Company, signing alone, or (b) in the case of the Trustee or an Owner Trustee or a Loan Trustee, a Responsible Officer of the Trustee or such Owner Trustee or such Loan Trustee, as the case may be. "Offshore Certificates Exchange Date" has the meaning specified in Section 3.01(d). "Offshore Global Certificates" has the meaning specified in Section 3.01(d). "Offshore Physical Certificates" has the meaning specified in Section 3.01(e). "Opinion of Counsel" means a written opinion of legal counsel who (a) in the case of counsel for the Company may be (i) a senior attorney of the Company one of whose principal duties is furnishing advice as to legal matters, (ii) Cahill Gordon & Reindel or (iii) such other counsel designated by the Company and reasonably acceptable to the Trustee and (b) in the case of any Owner Trustee or any Loan Trustee, may be such counsel as may be designated by any of them whether or not such counsel is an employee of any of them, and who shall be reasonably acceptable to the Trustee. "Other Pass Through Trust Agreements" means each of the two other Atlas Air 1998-1 Pass Through Trust Agreements relating to Atlas Air Pass Through Trust, Series 1998-1A-O and Atlas Air Pass Through Trust, Series 1998-1C-O, dated the date hereof. 15 9 "Other Trustees" means the trustees under the Other Pass Through Trust Agreements, and any successor or other trustee appointed as provided therein. "Other Trusts" means the Atlas Air Pass Through Trust 1998-1A-O and the Atlas Air Pass Through Trust 1998-1C-O, each created on the date hereof. "Outstanding" when used with respect to Certificates, means, as of the date of determination, all Certificates theretofore authenticated and delivered under this Agreement, except: (a) Certificates theretofore cancelled by the Registrar or delivered to the Trustee or the Registrar for cancellation; (b) All of the Certificates if money in the full amount required to make the final distribution with respect to such series pursuant to Section 11.01 hereof has been theretofore deposited with the Trustee in trust for the Holders of the Certificates as provided in Section 4.01 pending distribution of such money to such Certificateholders pursuant to payment of such final distribution payment; and (c) Certificates in exchange for or in lieu of which other Certificates have been authenticated and delivered pursuant to this Agreement. "Owned Aircraft" has the meaning specified in the recitals hereto. "Owned Aircraft Participation Agreement" means any participation agreement substantially in the form of Exhibit C-1 to the Note Purchase Agreement, as the same may be amended, supplemented or otherwise modified in accordance with its terms. "Owner Trustee's Purchase Agreement" has the meaning, with respect to the Certificates if the related Aircraft is leased to the Company, specified therefor in the related Lease. "Participation Agreement" means, collectively, the Leased Aircraft Participation Agreement and the Owned Aircraft Participation Agreement. "Paying Agent" means, with respect to the Certificates, the paying agent maintained and appointed for the Certificates pursuant to Section 7.12. "Permanent Offshore Global Certificates" has the meaning specified in Section 3.01(d). 16 10 "Permitted Investments" means obligations of the United States of America or agencies or instrumentalities thereof for the payment of which the full faith and credit of the United States of America is pledged, maturing in not more than 60 days after the date of acquisition thereof or such lesser time as is required for the distribution of any Special Payments on a Special Distribution Date. "Person" means any person, including any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, trustee, unincorporated organization, or government or any agency or political subdivision thereof. "Physical Certificates" has the meaning specified in Section 3.01. "Placement Agents" means Morgan Stanley & Co. Incorporated, BT Alex. Brown Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co. "Placement Agreement" means the Placement Agreement dated January 27, 1998 among the Placement Agents and the Company, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Pool Balance" means, as of any date, (i) the original aggregate face amount of the Certificates less (ii) the aggregate amount of all payments made in respect of the Certificates other than payments made in respect of interest or premium thereon or reimbursement of any costs or expenses incurred in connection therewith. The Pool Balance as of any Distribution Date shall be computed after giving effect to the payment of principal, if any, on the Equipment Notes or other Trust Property held in the Trust and the distribution thereof to be made on such Distribution Date. "Pool Factor" means, as of any date, the quotient (rounded to the seventh decimal place) computed by dividing (i) the Pool Balance of such series as at such date by (ii) the original aggregate face amount of the Certificates. The Pool Factor as of any Distribution Date shall be computed after giving effect to the payment of principal, if any, on the Equipment Notes or other Trust Property held in the Trust and the distribution thereof to be made on such Distribution Date. "Potential Purchaser" has the meaning, with respect to any Certificateholder, specified in Section 6.01(b). "Private Placement Legend" has the meaning specified in Section 3.02(a). 17 11 "PTC Event of Default" means, with respect to the Certificates, any failure to pay within ten Business Days of the due date thereof: (i) the outstanding Pool Balance of such series of Certificates on the date specified in any Trust Supplement for such payment or (ii) interest due on the Certificates on any Distribution Date (unless the related Subordination Agent shall have made an Interest Drawing or Drawings (as defined in the related Intercreditor Agreement), or a withdrawal or withdrawals pursuant to a cash collateral account under such Intercreditor Agreement, with respect thereto in an aggregate amount sufficient to pay such interest and shall have distributed such amount to the Trustee). "Purchasing Certificateholder" has the meaning, with respect to any Certificateholder, specified in Section 6.01(b). "QIB" means a qualified institutional buyer as defined in Rule 144A. "Record Date" means, with respect to any Trust or the related series of Certificates, (i) for Scheduled Payments to be distributed on any Regular Distribution Date, other than the final distribution with respect to such series, the 15th day (whether or not a Business Day) preceding such Regular Distribution Date, and (ii) for Special Payments to be distributed on any Special Distribution Date, other than the final distribution with respect to such series, the 15th day (whether or not a Business Day) preceding such Special Distribution Date. "Register" and "Registrar" means, each with respect to the Certificates, the register maintained and the registrar appointed pursuant to Sections 3.04 and 7.12. "Registration Event" has the meaning set forth in the Placement Agreement. "Registration Rights Agreement" means the Registration Rights Agreement dated February 9, 1998, among the Placement Agents, the Trustee, the Other Trustees and the Company, as amended, supplemented or otherwise modified from time to time in accordance with its terms. "Registration Statement" means the Registration Statement defined in the Registration Rights Agreement. "Regular Distribution Date" means, with respect to distributions of Scheduled Payments in respect of any series of Certificates, each date designated as such in this Agreement, until payment of all the Scheduled Payments to be made under the Equipment Notes held in the Trust have been made. 18 12 "Regulation S" means Regulation S under the Securities Act or any successor regulation thereto. "Related Pass Through Trust Agreement" means the Atlas Air 1998-1B-S Pass Through Trust Agreement relating to the Atlas Air Pass Through Trust 1998-1B-S and entered into by the Company and the Trustee, which agreement becomes effective upon the execution and delivery of the Assignment and Assumption Agreement pursuant to Section 11.01. "Related Trust" means the Atlas Pass Through Trust 1998-1B-S, to be formed under the Related Pass Through Trust Agreement. "Related Trustee" means the trustee under the Related Pass Through Trust Agreement. "Request" means a request by the Company setting forth the subject matter of the request accompanied by an Officer's Certificate and an Opinion of Counsel as provided in Section 1.02 of this Agreement. "Responsible Officer" means, with respect to any Trustee, any Loan Trustee and any Owner Trustee, any officer in the Corporate Trust Department of the Trustee, Loan Trustee or Owner Trustee or any other officer customarily performing functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of his knowledge of and familiarity with a particular subject. "Responsible Party" means, with respect to the Certificates, the person designated as such in the related Trust Supplement. "Rule 144A" means Rule 144A under the Securities Act and any successor rule thereto. "Scheduled Payment" means, with respect to any Equipment Note, (i) any payment of principal or interest on such Equipment Note (other than any such payment which is not in fact received by the Trustee or any Subordination Agent within five days of the date on which such payment is scheduled to be made) or (ii) any payment of interest on the Certificates with funds drawn under the Liquidity Facility for such series, which payment represents the installment of principal on such Equipment Note at the stated maturity of such installment, the payment of regularly scheduled interest accrued on the unpaid principal amount of such Equipment Note, or both; provided, however, that any payment of principal, premium, if any, or interest 19 13 resulting from the redemption or purchase of any Equipment Note shall not constitute a Scheduled Payment. "SEC" means the Securities and Exchange Commission, as from time to time constituted or created under the Securities Exchange Act of 1934, as amended, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties on such date. "Selling Certificateholder" has the meaning, with respect to any Certificateholder, specified in Section 6.01(b). "Shelf Registration Statement" has the meaning set forth in the Registration Rights Agreement. "Special Distribution Date" means, with respect to the Certificates, each date on which a Special Payment is to be distributed as specified in this Agreement. "Special Payment" means (i) any payment (other than a Scheduled Payment) in respect of, or any proceeds of, any Equipment Note or Trust Indenture Estate (as defined in each Indenture) or Special Redemption Premium, (ii) the amounts required to be distributed pursuant to the last paragraph of Section 2.02(b) or (iii) the amounts required to be distributed pursuant to the penultimate paragraph of Section 2.02(b). "Special Payments Account" means, with respect to the Certificates, the account or accounts created and maintained for such series pursuant to Section 4.01(b) and the related Trust Supplement. "Special Redemption Premium" means the premium payable by the Company in respect of the Final Withdrawal pursuant to the Note Purchase Agreement. "Specified Investments" means, with respect to any Trust, (i) obligations of, or guaranteed by, the United States Government or agencies thereof, (ii) open market commercial paper of any corporation incorporated under the laws of the United States of America or any state thereof rated at least P-2 or its equivalent by Moody's Investors Service, Inc. or at least A-2 or its equivalent by Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., (iii) certificates of deposit issued by commercial banks organized under the laws of the United States or of any political subdivision thereof having a combined capital and surplus in excess of $100,000,000 which banks or their holding companies have a rating of A or its equivalent by Moody's Investors Service, Inc. or Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc.; provided, however, that the 20 14 aggregate amount at any one time so invested in certificates of deposit issued by any one bank shall not exceed 5% of such bank's capital and surplus, (iv) U.S. dollar-denominated offshore certificates of deposit issued by, or offshore time deposits with, any commercial bank described in clause (iii) above or any subsidiary thereof and (v) repurchase agreements with any financial institution having combined capital and surplus of at least $100,000,000 with any of the obligations described in clauses (i) through (iv) above as collateral; provided furtherthat if all of the above investments are unavailable, the entire amounts to be invested may be used to purchase federal funds from an entity described in clause (iii) above. "Subordination Agent" has the meaning specified therefor in the Intercreditor Agreement. "Substitute Aircraft" has the meaning specified in the Note Purchase Agreement. "Temporary Offshore Global Certificates" has the meaning specified in Section 3.01(d). "Transfer Date" has the meaning specified in Section 11.01. "Triggering Event" has the meaning specified therefor in the Intercreditor Agreement. "Trust" means the trust under this Agreement. "Trustee" means Wilmington Trust Company, or its successor in interest, and any successor or other trustee appointed as provided herein. "Trustee's Liens" has the meaning specified in Section 7.17. "Trust Indenture Act", except as otherwise provided in Section 9.06, means, with respect to any particular Trust, the United States Trust Indenture Act of 1939, as in force at the date as of which the related Trust Supplement was executed. "Trust Property" means (i) subject to the Intercreditor Agreement, the Equipment Notes held as the property of the Trust, all monies at any time paid thereon and all monies due and to become due thereunder, (ii) funds from time to time deposited in the Escrow Account, the Certificate Account and the Special Payments Account and, subject to the Intercreditor Agreement, any proceeds from the sale by the Trustee pursuant to Article VI hereof of any such Equipment Note, (iii) all rights of the Trust and the Trustee, on behalf of the Trust, under the Intercreditor 21 15 Agreement, the Escrow Agreement, the Note Purchase Agreement and the Liquidity Facilities, including, without limitation, all rights to receive certain payments thereunder, and all monies paid to the Trustee on behalf of the Trust pursuant to the Intercreditor Agreement or the Liquidity Facilities, provided that rights with respect to the Deposits or under the Escrow Agreement, except for the right to direct withdrawals for the purchase of Equipment Notes to be held herein, will not constitute Trust Property. "U.S. Global Certificate" has the meaning specified in Section 3.01(c). "U.S. Physical Certificates" has the meaning specified in Section 3.01(e). "7.68 % 1998-1B Initial Pass Through Certificates" has the meaning specified in Section 3.01(a). "7.68% 1998-1B Exchange Pass Through Certificates" has the meaning specified in Section 3.01(a). Section 1.02. Compliance Certificates and Opinions. Upon any application or request by the Company, any Owner Trustee or any Loan Trustee to the Trustee to take any action under any provision of this Agreement, the Company, such Owner Trustee or such Loan Trustee, as the case may be, shall furnish to the Trustee (i) an Officer's Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Agreement relating to the proposed action have been complied with and (ii) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Agreement relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Agreement (other than a certificate provided pursuant to Section 8.04(d)) shall include: (a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions in this Agreement relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; 22 16 (c) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. Section 1.03. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters and any such Person may certify or give an opinion as to such matters in one or several documents. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Agreement, they may, but need not, be consolidated and form one instrument. Section 1.04. Directions of Certificateholders. (a) Any direction, consent, request, demand, authorization, notice, waiver or other action provided by this Agreement in respect of the Certificates to be given or taken by Certificateholders (a "Direction") may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Certificateholders in person or by an agent or proxy duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, when it is hereby expressly required pursuant to this Agreement, to the Company or any Loan Trustee. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Certificateholders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent or proxy shall be sufficient for any purpose of this Trust Agreement and conclusive in favor of the Trustee, the Company and the related Loan Trustee, if made in the manner provided in this Section 1.04. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the certificate of any notary public or other officer of any jurisdiction authorized to take acknowledgments of deeds or administer oaths that the Person executing such instrument acknowledged to him the execution thereof, or by an affidavit of a witness to such execution sworn to before any such notary or such other officer, and where such execution is by an officer of a corporation or association or a member of a partnership, on behalf of such corporation, association or partnership, such 23 17 certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other reasonable manner which the Trustee deems sufficient. (c) In determining whether the Certificateholders of the requisite Fractional Undivided Interests of Certificates Outstanding have given any Direction under this Agreement, Certificates owned by the Company or any Affiliate thereof shall be disregarded and deemed not to be Outstanding for purposes of any such determination. In determining whether the Trustee shall be protected in relying upon any such Direction, only Certificates which the Trustee knows to be so owned shall be so disregarded. Notwithstanding the foregoing, (i) if any such Person owns 100% of the Certificates Outstanding, such Certificates shall not be so disregarded, and (ii) if any amount of Certificates so owned by any such Person have been pledged in good faith, such Certificates shall not be disregarded if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Certificates and that the pledgee is not the Company or any Affiliate thereof. (d) The Company may, at its option, by delivery of an Officer's Certificate to the Trustee, set a record date to determine the Certificateholders in respect of the Certificates, entitled to give any Direction. Notwithstanding Section 316(c) of the Trust Indenture Act, such record date shall be the record date specified in such Officer's Certificate, which shall be a date not more than 30 days prior to the first solicitation of Certificateholders of the applicable series in connection therewith. If such a record date is fixed, such Direction may be given before or after such record date, but only the Certificateholders of record of the applicable series at the close of business on such record date shall be deemed to be Certificateholders for the purposes of determining whether Certificateholders of the requisite proportion of Outstanding Certificates have authorized or agreed or consented to such Direction, and for that purpose the Outstanding Certificates shall be computed as of such record date; provided, however, that no such Direction by the Certificateholders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Agreement not later than one year after such record date. (e) Any Direction by the Holder of any Certificate shall bind the Holder of every Certificate issued upon the transfer thereof or in exchange therefor or in lieu thereof, whether or not notation of such Direction is made upon such Certificate. (f) Except as otherwise provided in Section 1.04(c), Certificates owned by or pledged to any Person shall have an equal and proportionate benefit under the provisions of this Agreement, without preference, priority or distinction as among all of the Certificates. 24 18 ARTICLE II ORIGINAL ISSUANCE OF CERTIFICATES: ACQUISITION OF TRUST PROPERTY Section 2.01. Delivery of Documents; Delivery Dates. (a) The Trustee is hereby directed (i) to execute and deliver the Intercreditor Agreement, the Escrow Agreement and the Note Purchase Agreement on or prior to the Issuance Date, each in the form delivered to the Trustee by the Company and (ii) subject to the respective terms thereof, to perform its obligations thereunder. Upon request of the Company and the satisfaction or waiver of the closing conditions specified in the Placement Agreement, the Trustee shall execute, deliver, authenticate, issue and sell Certificates in authorized denominations equaling in the aggregate the amount set forth, with respect to the Trust, in Schedule II to the Placement Agreement evidencing the entire ownership interest in the Trust, which amount equals the maximum aggregate principal amount of Equipment Notes which may be purchased by the Trustee pursuant to the Note Purchase Agreement. Except as provided in Sections 3.04 and 3.07 of this Agreement, the Trustee shall not execute, authenticate or deliver Certificates in excess of the aggregate amount specified in this paragraph. (b) On or after the Issuance Date, the Company may deliver from time to time to the Trustee a Delivery Notice relating to one or more Equipment Notes. After receipt of a Delivery Notice and in any case no later than one Business Day prior to a Delivery Date as to which such Delivery Notice relates (the "Applicable Delivery Date"), the Trustee shall (as and when specified in the Delivery Notice) instruct the Escrow Agent to provide a Notice of Purchase Withdrawal to the Depositary requesting (A) the withdrawal of one or more Deposits on the Applicable Delivery Date in accordance with and to the extent permitted by the terms of the Escrow Agreement and the Deposit Agreement and (B) the payment of all, or a portion, of such Deposit or Deposits in an amount equal in the aggregate to the purchase price of such Equipment Notes to or on behalf of the Owner Trustee or the Company, as the case may be, issuing such Equipment Notes, all as shall be described in the Delivery Notice. The Trustee shall (as and when specified in such Delivery Notice), subject to the conditions set forth in Section 2 of the Note Purchase Agreement, enter into and perform its obligations under the Participation Agreement specified in such Delivery Notice (the "Applicable Participation Agreement") and cause such certificates, documents and legal opinions relating to the Trustee to be duly delivered as required by the Applicable Participation Agreement. If at any time prior to the Applicable Delivery Date, the Trustee receives a notice of postponement pursuant to Section 1(e) or 1(f) of the Note Purchase Agreement, then the Trustee shall give the Depositary (with a copy to the Escrow Agent) a notice of cancellation of such Notice of Purchase Withdrawal relating to such Deposit or Deposits on such Applicable Delivery Date. Upon satisfaction of the conditions specified in the Note Purchase Agreement and the Applicable Participation Agreement, the Trustee shall 25 19 purchase the applicable Equipment Notes with the proceeds of the withdrawals of one or more Deposits made on the Applicable Delivery Date in accordance with the terms of the Deposit Agreement and the Escrow Agreement. The purchase price of such Equipment Notes shall equal the principal amount of such Equipment Notes. Amounts withdrawn from such Deposit or Deposits in excess of the purchase price of the Equipment Notes or to the extent not applied on the Applicable Delivery Date to the purchase price of the Equipment Notes, shall be re-deposited by the Trustee with the Depositary on the Applicable Delivery Date in accordance with the terms of the Deposit Agreement. Section 2.02. Withdrawal of Deposits. If any Deposits remain outstanding on the Business Day next succeeding the Cut-off Date, (i) the Trustee shall give the Escrow Agent notice that the Trustee's obligation to purchase Equipment Notes under the Note Purchase Agreement has terminated and instruct the Escrow Agent to provide a notice of Final Withdrawal to the Depositary substantially in the form of Exhibit B to the Deposit Agreement (the "Final Withdrawal Notice") and (ii) the Trustee will make a demand upon the Company under the Note Purchase Agreement for an amount equal to the Special Redemption Premium, such payment to be made on the Final Withdrawal Date. Section 2.03. Acceptance by Trustee. The Trustee, upon the execution and delivery of this Agreement, acknowledges its acceptance of all right, title and interest in and to the Trust Property and will hold such right, title and interest for the benefit of all then present and future Certificateholders, upon the trusts herein set forth. By its payment for and acceptance of each Certificate issued to it under this Agreement, each initial Holder of such Certificate as grantor of such Trust shall thereby join in the creation and declaration of such Trust. Section 2.04. Limitation of Powers. The Trust is constituted solely for the purpose of making the investment in the Equipment Notes, and, except as set forth herein, the Trustee shall not be authorized or empowered to acquire any other investments or engage in any other activities and, in particular, the Trustee shall not be authorized or empowered to do anything that would cause such Trust to fail to qualify as a "grantor trust" for federal income tax purposes (including, as subject to this restriction, acquiring any Aircraft (as defined in the respective Indentures) by bidding such Equipment Notes or otherwise, or taking any action with respect to any such Aircraft once acquired). 26 20 ARTICLE III THE CERTIFICATES Section 3.01. Title, Form, Denomination and Execution of Certificates. (a) The Initial Certificates shall be known as the "7.68% 1998-1B-O Initial Pass Through Certificates" and the Exchange Certificates shall be known as the "7.68% 1998-1B-O Exchange Pass Through Certificates", in each case, of the Trust. Each Certificate will represent a fractional undivided interest in the Trust and shall be substantially in the form set forth as Exhibit A hereto, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Agreement and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Certificates, as evidenced by their execution of the Certificates. Any portion of the text of any Certificate may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Certificate. (b) The Initial Certificates shall be issued only in fully registered form without coupons and only in denominations of $100,000 or integral multiples of $1,000 in excess thereof, except that one Certificate may be issued in a denomination of less than $100,000. The Exchange Certificates will be issued in denominations of $1,000 or integral multiples thereof. Each Certificate shall be dated the date of its authentication. The aggregate Fractional Undivided Interest of Certificates shall not at any time exceed $300,254,000. (c) Initial Certificates offered and sold in reliance on Rule 144A shall be issued initially in the form of a single permanent global Certificate in registered form, substantially in the form set forth as Exhibit A hereto (the "U.S. Global Certificate"), duly executed and authenticated by the Trustee as hereinafter provided. The U.S. Global Certificate will be registered in the name of a nominee for the Depositary and deposited with the Trustee, as custodian for the Depositary. The aggregate principal amount of the U.S. Global Certificate may from time to time be increased or decreased by adjustments made on the records of the Depositary or its nominee, or of the Trustee, as custodian for the Depositary or its nominee, as hereinafter provided. (d) Initial Certificates offered and sold in offshore transactions in reliance on Regulation S shall be issued initially in the form of a single temporary global Certificate in registered form, substantially in the form set forth as Exhibit A hereto (the "Temporary Offshore Global Certificate") duly executed and authenticated by the Trustee as hereinafter provided. The Temporary Offshore Global Certificates will be registered in the name of a nominee of the Depositary for credit to the account of the Agent Members acting as depositaries for Euroclear and Cedel and deposited with the Trustee as custodian for the 27 21 Depositary. At any time following March 21, 1998 (the "Offshore Certificates Exchange Date"), upon receipt by the Trustee of a certificate substantially in the form of Exhibit B hereto, a single permanent global Certificate in registered form substantially in the form set forth in Exhibit A (the "Permanent Offshore Global Certificate"; and together with the Temporary Offshore Global Certificate, the "Offshore Global Certificates"), duly executed and authenticated by the Trustee as hereinafter provided, shall be registered in the name of a nominee for the Depositary and deposited with the Trustee, as custodian for the Depositary, and the Registrar shall reflect on its books and records the date of such transfer and a decrease in the principal amount of any Temporary Offshore Global Certificate in an amount equal to the principal amount of the beneficial interest in such Temporary Offshore Global Certificate transferred. The U.S. Global Certificate and the Offshore Global Certificates are sometimes referred to as the "Global Certificates". (e) Initial Certificates offered and sold to Institutional Accredited Investors shall be issued in the form of permanent certificated Certificates in registered form in substantially the form set forth as Exhibit A hereto (the "U.S. Physical Certificates"). Certificates issued pursuant to Section 3.05(b) in exchange for interests in any Offshore Global Certificate shall be in the form of permanent certificated Certificates in registered form substantially in the form set forth in Exhibit A (the "Offshore Physical Certificates"). The Offshore Physical Certificates and U.S. Physical Certificates are sometimes collectively herein referred to as the "Physical Certificates". (f) The Exchange Certificates shall be issued in the form of one or more global Certificates substantially in the form of Exhibit A hereto (each, a "Global Exchange Certificate"), except that (i) the Private Placement Legend (hereinafter defined) shall be omitted and (ii) such Exchange Certificates shall contain such appropriate insertions, omissions, substitutions and other variations from the form set forth in Exhibit A hereto relating to the nature of the Exchange Certificates as the Responsible Officer of the Trustee executing such Exchange Certificates on behalf of the Trust may determine, as evidenced by such officer's execution on behalf of the Trust of such Exchange Certificates. Such Global Exchange Certificates shall be in registered form and be registered in the name of DTC and deposited with the Trustee, at its Corporate Trust Office, as custodian for DTC. The aggregate principal amount of any Global Exchange Certificate may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC for such Global Exchange Certificate, which adjustments shall be conclusive as to the aggregate principal amount of any such Global Exchange Certificate. Subject to clause (i) and (ii) of the first sentence of this Section 3.01(f), the terms hereof applicable to Restricted Global Certificates and/or Global Certificates shall apply to the Global Exchange Certificates, mutatis mutandis. (g) The definitive Certificates shall be in registered form and shall be typed, printed, lithographed or engraved or produced by any combination of these methods 28 22 or may be produced in any other manner, all as determined by the officers executing such Certificates, as evidenced by their execution of such Certificates. Section 3.02. Restrictive Legends. (a) Subject to Section 3.06, unless and until (i) an Initial Certificate is sold under an effective Registration Statement or (ii) an Initial Certificate is exchanged for an Exchange Certificate pursuant to an effective Exchange Offer Registration Statement, in each case as provided for in the Registration Rights Agreement, each Global Certificate (other than the Permanent Offshore Global Certificate) and each U.S. Physical Certificate shall bear the following legend (the "Private Placement Legend") on the face thereof: THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS CERTIFICATE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT; (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFICATE WAS HELD BY ATLAS AIR, INC., THE TRUSTEE OR ANY AFFILIATE OF ANY OF SUCH PERSONS RESELL OR OTHERWISE TRANSFER THIS CERTIFICATE EXCEPT (A) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (B) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING $100,000 OR MORE AGGREGATE PRINCIPAL AMOUNT OF SUCH CERTIFICATE THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS CERTIFICATE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (E) PURSUANT TO AN 29 23 EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT; AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS CERTIFICATE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS CERTIFICATE WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFICATE WAS HELD BY ATLAS AIR, INC., THE TRUSTEE OR ANY AFFILIATE OF ANY OF SUCH PERSONS THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE PASS THROUGH TRUST AGREEMENT CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS CERTIFICATE IN VIOLATION OF THE FOREGOING RESTRICTIONS. (b) Each Global Certificate shall also bear the following legend on the face thereof: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE PASS THROUGH TRUST AGREEMENT REFERRED TO HEREIN. 30 24 Section 3.03. Authentication of Certificates. (a) On the Issuance Date, the Trustee shall duly execute, authenticate and deliver Certificates in authorized denominations equalling in the aggregate the amount set forth, with respect to the Trust, in Schedule II to the Placement Agreement, evidencing the entire ownership of the Trust, which amount equals the maximum aggregate principal amount of the Equipment Notes which may be purchased by the Trustee pursuant to the Note Purchase Agreement. (b) No Certificate shall be entitled to any benefit under this Agreement or be valid or obligatory for any purpose, unless there appears on such Certificate a certificate of authentication substantially in the form provided for herein executed by the Trustee by the manual signature of one of its authorized signatories, and such certificate upon any Certificate shall be conclusive evidence, and the only evidence, that such Certificate has been duly authenticated and delivered hereunder. Section 3.04. Transfer and Exchange. The Trustee shall cause to be kept at the office or agency to be maintained by it in accordance with the provisions of Section 7.12 of this Agreement a register (the "Register") for the Certificates in which, subject to such reasonable regulations as it may prescribe, the Trustee shall provide for the registration of the Certificates and of transfers and exchanges of the Certificates as herein provided. The Trustee shall initially be the registrar (the "Registrar") for the purpose of registering the Certificates and transfers and exchanges of the Certificates as herein provided. A Certificateholder may transfer a Certificate by written application to the Registrar stating the name of the proposed transferee and otherwise complying with the terms of this Agreement, including providing a written certificate or other evidence of compliance with any restrictions on transfer. No such transfer shall be effected until, and such transferee shall succeed to the rights of a Certificateholder only upon, final acceptance and registration of the transfer by the Registrar in the Register. Prior to the registration of any transfer by a Certificateholder as provided herein, the Trustee shall treat the person in whose name the Certificate is registered as the owner thereof for all purposes, and the Trustee shall not be affected by notice to the contrary. Furthermore, the Depositary shall, by acceptance of a Global Certificate, agree that transfers of beneficial interests in such Global Certificate may be effected only through a book-entry system maintained by the Depositary (or its agent), and that ownership of a beneficial interest in the Certificate shall be required to be reflected in a book entry. When Certificates are presented to the Registrar with a request to register the transfer or to exchange them for an equal face amount of Certificates of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its requirements for such transactions are met. To permit registrations of transfers and exchanges in accordance with the terms, conditions and restrictions hereof, the Trustee shall execute and authenticate Certificates at the Registrar's request. No service charge shall be made for any registration of transfer or exchange of the Certificates, but the Trustee may require payment by the transferor of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or 31 25 other similar governmental charges payable upon exchanges pursuant to Section 3.10 or 9.07). Section 3.05. Book-Entry Provisions for U.S. Global Certificate and Offshore Global Certificates. (a) Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Agreement with respect to any Global Certificate held on their behalf by the Depositary, or the Trustee as its custodian, and the Depositary may be treated by the Trustee and any agent of the Trustee as the absolute owner of such Global Certificate for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Trustee or any agent of the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or shall impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a holder of any Certificate. Upon the issuance of any Global Certificate, the Registrar or its duly appointed agent shall record a nominee of the Depositary as the registered holder of such Global Certificate. (b) Transfers of any Global Certificate shall be limited to transfers of such Global Certificate or Offshore Global Certificate in whole, but not in part, to nominees of the Depositary, its successor or such successor's nominees. Beneficial interests in the U.S. Global Certificate and any Offshore Global Certificate may be transferred in accordance with the rules and procedures of the Depositary and the provisions of Section 3.06. Beneficial interests in the U.S. Global Certificate or an Offshore Global Certificate shall be delivered to all beneficial owners in the form of U.S. Physical Certificates or Offshore Physical Certificates, as the case may be, if (i) the Depositary notifies the Trustee that it is unwilling or unable to continue as Depositary for the U.S. Global Certificate or such Offshore Global Certificate, as the case may be, and a successor depositary is not appointed by the Trustee within 90 days of such notice or (ii) an Event of Default has occurred and is continuing and the Registrar has received a request from the Depositary to issue Physical Certificates. (c) Any beneficial interest in one of the Global Certificates that is transferred to a Person who takes delivery in the form of an interest in the other Global Certificate will, upon such transfer, cease to be an interest in such Global Certificate and become an interest in the other Global Certificate and, accordingly, will thereafter be subject to all transfer restrictions, if any, and other procedures applicable to beneficial interests in such other Global Certificate for as long as it remains such an interest. (d) In connection with the transfer of the entire U.S. Global Certificate or an entire Offshore Global Certificate to the beneficial owners thereof pursuant to paragraph (b) of this Section 3.05, such U.S. Global Certificate or Offshore Global Certificate, as the case may be, shall be deemed to be surrendered to the Trustee for cancellation, and the Trustee shall execute, authenticate and deliver, to each beneficial owner identified by the Depositary in exchange for its beneficial interest in such U.S. Global Certificate or Offshore 32 26 Global Certificate, as the case may be, an equal aggregate principal amount of U.S. Physical Certificates or Offshore Physical Certificates, as the case may be, of authorized denominations. (e) Any U.S. Physical Certificate delivered in exchange for an interest in the U.S. Global Certificate pursuant to paragraph (b) of this Section 3.05 shall, except as otherwise provided by paragraph (f) of Section 3.06, bear the Private Placement Legend. (f) Any Offshore Physical Certificate delivered in exchange for an interest in an Offshore Global Certificate pursuant to paragraph (b) of this Section shall, except as otherwise provided by paragraph (f) of Section 3.06, bear the applicable legend regarding transfer restrictions set forth in Section 3.02(a). (g) The registered holder of the U.S. Global Certificate or any Offshore Global Certificate may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Agreement or the Certificates. Section 3.06. Special Transfer Provisions. Unless and until (i) an Initial Certificate is sold under an effective Registration Statement, or (ii) an Initial Certificate is exchanged for an Exchange Certificate pursuant to an effective Exchange Offer Registration Statement, in each case pursuant to the Registration Rights Agreement, the following provisions shall apply to such Initial Certificates: (a) Transfers to Non-QIB Institutional Accredited Investors. The following provisions shall apply with respect to the registration of any proposed transfer of a Certificate to any Institutional Accredited Investor which is not a QIB (excluding transfers to or by Non-U.S. Persons): (i) The Registrar shall register the transfer of any Certificate, whether or not such Certificate bears the Private Placement Legend, if (x) the requested transfer is at least three years after the later of the original issue date of the Certificates and the last date on which such Certificate was held by the Company or any affiliate of any such persons or (y) the proposed transferee has delivered to the Registrar a letter substantially in the form of Exhibit D hereto and the aggregate principal amount of the Certificates being transferred is at least $100,000. (ii) If the proposed transferor is an Agent Member holding a beneficial interest in the U.S. Global Certificate, upon receipt by the Registrar of (x) the documents, if any, required by paragraph (i) and (y) instructions given in accordance with the Depositary's and the Registrar's procedures, the 33 27 Registrar shall reflect on its books and records the date of the transfer and a decrease in the principal amount of such U.S. Global Certificate in an amount equal to the principal amount of the beneficial interest in such U.S. Global Certificate to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver to the transferor or at its direction, one or more U.S. Physical Certificates of like tenor and amount. (b) Transfers to QIBs. The following provisions shall apply with respect to the registration of any proposed transfer of an Initial Certificate to a QIB (excluding Non-U.S. Persons): (i) If the Certificate to be transferred consists of U.S. Physical Certificates or an interest in any Temporary Offshore Global Certificate, the Registrar shall register the transfer if such transfer is being made by a proposed transferor who has checked the box provided for on the form of Initial Certificate stating, or has otherwise advised the Trustee and the Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on the form of Initial Certificate stating, or has otherwise advised the Trustee and the Registrar in writing, that it is purchasing the Initial Certificate for its own account or an account with respect to which it exercises sole investment discretion and that it, or the Person on whose behalf it is acting with respect to any such account, is a QIB within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Trust and/or the Company as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A. (ii) Upon receipt by the Registrar of the documents referred to in clause (i) above and instructions given in accordance with the Depositary's and the Registrar's procedures therefor, the Registrar shall reflect on its books and records the date of such transfer and an increase in the principal amount of the U.S. Global Certificate in an amount equal to the principal amount of the U.S. Physical Certificates or interests in the Temporary Offshore Global Certificate, as the case may be, being transferred, and the Trustee shall cancel such Physical Certificates or decrease the amount of such Temporary Offshore Global Certificate so transferred. (c) Transfers of Interests in the Permanent Offshore Global Certificate or Offshore Physical Certificates. The Registrar shall register any transfer of interests in 34 28 the Permanent Offshore Global Certificate or Offshore Physical Certificates without requiring any additional certification. (d) Transfers to Non-U.S. Persons at Any Time. The following provisions shall apply with respect to any registration of any transfer of an Initial Certificate to a Non-U.S. Person: (i) Prior to the Offshore Certificates Exchange Date, the Registrar shall register any proposed transfer of an Initial Certificate to a Non-U.S. Person upon receipt of a certificate substantially in the form set forth as Exhibit C hereto from the proposed transferor. (ii) On and after the Offshore Certificates Exchange Date, the Registrar shall register any proposed transfer to any Non-U.S. Person if the Certificate to be transferred is a U.S. Physical Certificate or an interest in the U.S. Global Certificate, upon receipt of a certificate substantially in the form of Exhibit C from the proposed transferor. The Registrar shall promptly send a copy of such certificate to the Company. (iii) Upon receipt by the Registrar of (x) the documents, if any, required by paragraph (ii) and (y) instructions in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records the date of such transfer and a decrease in the principal amount of such U.S. Global Certificate in an amount equal to the principal amount of the beneficial interest in such U.S. Global Certificate to be transferred, and (B) upon receipt by the Registrar of instructions given in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Offshore Global Certificate in an amount equal to the principal amount of the U.S. Physical Certificate or the U.S. Global Certificate, as the case may be, to be transferred, and the Trustee shall cancel the Physical Certificate, if any, so transferred or decrease the amount of such U.S. Global Certificate. (e) Private Placement Legend. Upon the transfer, exchange or replacement of Certificates not bearing the Private Placement Legend, the Registrar shall deliver Certificates that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Certificates bearing the Private Placement Legend, the Registrar shall deliver only Certificates that bear the Private Placement Legend unless either (i) the circumstances contemplated by paragraph (a)(i)(x) or (e)(ii) of this Section 3.06 exist or (ii) there is delivered to the Registrar an Opinion of Counsel to 35 29 the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act. (f) General. By its acceptance of any Certificate bearing the Private Placement Legend, each Holder of such a Certificate acknowledges the restrictions on transfer of such Certificate set forth in this Agreement and agrees that it will transfer such Certificate only as provided in this Agreement. The Registrar shall not register a transfer of any Certificate unless such transfer complies with the restrictions on transfer of such Certificate set forth in this Agreement. In connection with any transfer of Certificates, each Certificateholder agrees by its acceptance of the Certificates to furnish the Registrar or the Trustee such certifications, legal opinions or other information as either of them may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or a transaction not subject to, the registration requirements of the Securities Act; provided that the Registrar shall not be required to determine the sufficiency of any such certifications, legal opinions or other information. Until such time as no Certificates remain Outstanding, the Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 3.05 or this Section 3.06. The Trustee, if not the Registrar at such time, shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar. Section 3.07. Mutilated, Destroyed, Lost or Stolen Certificates. If (a) any mutilated Certificate is surrendered to the Registrar or the Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Certificate and (b) there is delivered to the Registrar and the Trustee such security, indemnity or bond, as may be required by them to save each of them harmless, then, in the absence of notice to the Registrar or the Trustee that such destroyed, lost or stolen Certificate has been acquired by a bona fide purchaser, and provided that the requirements of Section 8-405 of the Uniform Commercial Code in effect in any applicable jurisdiction are met, the Trustee shall execute, authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate or Certificates, in authorized denominations and of like Fractional Undivided Interest and bearing a number not contemporaneously outstanding. In connection with the issuance of any new Certificate under this Section 3.07, the Trustee may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee and the Registrar) connected therewith. 36 30 Any duplicate Certificate issued pursuant to this Section 3.07 shall constitute conclusive evidence of the appropriate Fractional Undivided Interest in the Trust, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Certificates. Section 3.08. Persons Deemed Owners. Prior to due presentment of a Certificate for registration of transfer, the Trustee, the Registrar and any Paying Agent may treat the Person in whose name any Certificate is registered (as of the day of determination) as the owner of such Certificate for the purpose of receiving distributions pursuant to Article IV and for all other purposes whatsoever, and none of the Trustee, the Registrar or any Paying Agent shall be affected by any notice to the contrary. Section 3.09. Cancellation. All Certificates surrendered for payment or transfer or exchange shall, if surrendered to the Trustee or any agent of the Trustee other than the Registrar, be delivered to the Registrar for cancellation and shall promptly be cancelled by it. No Certificates shall be authenticated in lieu of or in exchange for any Certificates cancelled as provided in this Section, except as expressly permitted by this Agreement. All cancelled Certificates held by the Registrar shall be destroyed and a certification of their destruction delivered to the Trustee. Section 3.10. Temporary Certificates. Until definitive Certificates are ready for delivery, the Trustee shall authenticate temporary Certificates. Temporary Certificates shall be substantially in the form of definitive Certificates but may have insertions, substitutions, omissions and other variations determined to be appropriate by the officers executing the temporary Certificates, as evidenced by their execution of such temporary Certificates. If temporary Certificates are issued, the Trustee will cause definitive Certificates to be prepared without unreasonable delay. After the preparation of definitive Certificates, the temporary Certificates shall be exchangeable for definitive Certificates upon surrender of the temporary Certificates at the office or agency of the Trustee designated for such purpose pursuant to Section 7.12, without charge to the Certificateholder. Upon surrender for cancellation of any one or more temporary Certificates, the Trustee shall execute, authenticate and deliver in exchange therefor a like face amount of definitive Certificates of authorized denominations. Until so exchanged, the temporary Certificates shall be entitled to the same benefits under this Agreement as definitive Certificates. Section 3.11. Limitation of Liability for Payments. All payments and distributions made to Certificateholders shall be made only from the Trust Property and only to the extent that the Trustee shall have sufficient income or proceeds from the Trust 37 31 Property to make such payments in accordance with the terms of Article IV of this Agreement. Each Certificateholder, by its acceptance of a Certificate, agrees that it will look solely to the income and proceeds from the Trust Property for any payment or distribution due to such Certificateholder pursuant to the terms of this Agreement and that it will not have any recourse to the Company, the Trustee, the Loan Trustees, the Liquidity Providers, the Owner Trustees or the Owner Participants, except as otherwise expressly provided herein or in the Intercreditor Agreement. The Company is a party to this Agreement solely for purposes of meeting the requirements of the Trust Indenture Act, and therefore shall not have any right, obligation or liability hereunder (except as otherwise expressly provided herein). ARTICLE IV DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS Section 4.01. Certificate Account and Special Payments Account. (a) The Trustee shall establish and maintain on behalf of the Certificateholders a Certificate Account as one or more non-interest-bearing accounts. The Trustee shall hold such Certificate Account in trust for the benefit of the Certificateholders, and shall make or permit withdrawals therefrom only as provided in this Agreement. On each day when a Scheduled Payment is made to the Trustee under the Intercreditor Agreement with respect to the Certificates, the Trustee, upon receipt thereof, shall immediately deposit the aggregate amount of such Scheduled Payment in such Certificate Account. (b) The Trustee shall establish and maintain on behalf of the Certificateholders a Special Payments Account as one or more accounts, which shall be non-interest bearing except as provided in Section 4.04. The Trustee shall hold the Special Payments Account in trust for the benefit of the Certificateholders and shall make or permit withdrawals therefrom only as provided in this Agreement. On each day when one or more Special Payments are made to the Trustee under the Intercreditor Agreement and upon payment of the Special Redemption Premium to the Trustee under the Note Purchase Agreement with respect to the Certificates, the Trustee, upon receipt thereof, shall immediately deposit the aggregate amount of such Special Payments in such Special Payments Account. (c) The Trustee shall present (or, if applicable, cause the Subordination Agent to present) to the related Loan Trustee of each Equipment Note such Equipment Note on the date of its stated final maturity or, in the case of any Equipment Note which is to be 38 32 redeemed in whole pursuant to the related Indenture, on the applicable redemption date under such Indenture. Section 4.02. Distributions from Certificate Account and Special Payments Account. (a) On each Regular Distribution Date with respect to a series of Certificates or as soon thereafter as the Trustee has confirmed receipt of the payment of all or any part of the Scheduled Payments due on the Equipment Notes held (subject to the Intercreditor Agreement) in the related Trust on such date, the Trustee shall distribute out of the applicable Certificate Account the entire amount deposited therein pursuant to Section 4.01(a). There shall be so distributed to each Certificateholder of record of such series on the Record Date with respect to such Regular Distribution Date (other than as provided in Section 11.01 concerning the final distribution) by check mailed to such Certificateholder, at the address appearing in the Register, such Certificateholder's pro rata share (based on the Fractional Undivided Interest in the Trust held by such Certificateholder) of the total amount in the applicable Certificate Account, except that, with respect to Certificates registered on the Record Date in the name of a Clearing Agency (or its nominee), such distribution shall be made by wire transfer in immediately available funds to the account designated by such Clearing Agency (or such nominee). (b) On each Special Distribution Date with respect to any Special Payment with respect to the Certificates or as soon thereafter as the Trustee has confirmed receipt of any Special Payments due on the Equipment Notes held (subject to the Intercreditor Agreement) in the related Trust or realized upon the sale of such Equipment Notes or receipt of the Special Redemption Premium, the Trustee shall distribute out of the applicable Special Payments Account the entire amount of such applicable Special Payment deposited therein pursuant to Section 4.01(b). There shall be so distributed to each Certificateholder of record of such series on the Record Date with respect to such Special Distribution Date (other than as provided in Section 11.01 concerning the final distribution) by check mailed to such Certificateholder, at the address appearing in the Register, such Certificateholder's pro rata share (based on the Fractional Undivided Interest in the related Trust held by such Certificateholder) of the total amount in the applicable Special Payments Account on account of such Special Payment, except that, with respect to Certificates registered on the Record Date in the name of a Clearing Agency (or its nominee), such distribution shall be made by wire transfer in immediately available funds to the account designated by such Clearing Agency (or such nominee). (c) The Trustee shall, at the expense of the Company, cause notice of each Special Payment with respect to a series of Certificates to be mailed to each Certificateholder at his address as it appears in the Register. In the event of redemption or purchase of Equipment Notes held in the related Trust, such notice shall be mailed not less than 15 days prior to the Special Distribution Date for the Special Payment resulting from such redemption or purchase, which Special Distribution Date shall be the date of such redemption or 39 33 purchase. In the event that any Special Redemption Premium is to be paid by the Company to the Trustee under the Note Purchase Agreement, such notice shall be mailed, together with the notice by the Escrow Paying Agent under Section 2.06 of the Escrow Agreement, not less than 20 days prior to the Special Distribution Date for such amount, which Special Distribution Date shall be the Final Withdrawal Date. In the case of any other Special Payments, such notice shall be mailed as soon as practicable after the Trustee has confirmed that it has received funds for such Special Payment, stating the Special Distribution Date for such Special Payment which shall occur not less than 15 days after the date of such notice and as soon as practicable thereafter. Notices mailed by the Trustee shall set forth: (i) the Special Distribution Date and the Record Date therefor (except as otherwise provided in Section 11.01); (ii) the amount of the Special Payment for each $1,000 face amount Certificate and the amount thereof constituting principal, premium, if any, and interest; (iii) the reason for the Special Payment; and (iv) if the Special Distribution Date is the same date as a Regular Distribution Date for the Certificates, the total amount to be received on such date for each $1,000 face amount Certificate. If the amount of (i) premium, if any, payable upon the redemption or purchase of an Equipment Note or (ii) the Special Redemption Premium, if any, has not been calculated at the time that the Trustee mails notice of a Special Payment, it shall be sufficient if the notice sets forth the other amounts to be distributed and states that any premium received will also be distributed. If any redemption of the Equipment Notes held in any Trust is cancelled, the Trustee, as soon as possible after learning thereof, shall cause notice thereof to be mailed to each Certificateholder at its address as it appears on the Register. Section 4.03. Statements to Certificateholders. (a) On each Regular Distribution Date and Special Distribution Date, the Trustee will include with each distribution of a Scheduled Payment or Special Payment, as the case may be, to Certificateholders a statement setting forth the information provided below (in the case of a Special Payment, including any Special Redemption Premium, reflecting in part the information provided by the Escrow Paying Agent under the Escrow Agreement). Such statement shall set forth (per $1,000 aggregate principal amount of Certificate as to (ii), (iii), (iv) and (v) below) the following information: 40 34 (i) the aggregate amount of funds distributed on such Distribution Date under the Agreement and under the Escrow Agreement, indicating the amount allocable to each source; (ii) the amount of such distribution under this Agreement allocable to principal and the amount allocable to premium (including the Special Redemption Premium), if any; (iii) the amount of such distribution under this Agreement allocable to interest; (iv) the amount of such distribution under the Escrow Agreement allocable to interest; (v) the amount of such distribution under the Escrow Agreement allocable to Deposits; and (vi) the Pool Balance and the Pool Factor. With respect to the Certificates registered in the name of a Clearing Agency or its nominee, on the Record Date prior to each Distribution Date, the Trustee will request from the Clearing Agency a securities position listing setting forth the names of all Clearing Agency Participants reflected on the Clearing Agency's books as holding interests in the Certificates on such Record Date. On each Distribution Date, the Trustee will mail to each such Clearing Agency Participant the statement described above and will make available additional copies as requested by such Clearing Agency Participant for forwarding to holders of interests in the Certificates. (b) Within a reasonable period of time after the end of each calendar year but not later than the latest date permitted by law, the Trustee shall furnish to each Person who at any time during such calendar year was a Certificateholder of record a statement containing the sum of the amounts determined pursuant to clauses (a)(i), (a)(ii), (a)(iii), (a)(iv) and (a)(v) above with respect to the related Trust for such calendar year or, in the event such Person was a Certificateholder of record during a portion of such calendar year, for the applicable portion of such year, and such other items as are readily available to the Trustee and which a Certificateholder shall reasonably request as necessary for the purpose of such Certificateholder's preparation of its federal income tax returns. Such statement and such other items shall be prepared on the basis of information supplied to the Trustee by the Clearing Agency Participants and shall be delivered by the Trustee to such Clearing Agency Participants to be available for forwarding by such Clearing Agency Participants to the holders of interests in the Certificates in the manner described in Section 4.03(a). 41 35 (c) Promptly following (i) the Delivery Period Termination Date, if there has been any change in the information set forth in clauses (x), (y) and (z) below from that set forth in page 65 of the Offering Memorandum, and (ii) any early redemption or purchase of, or any default in the payment of principal or interest in respect of, any of the Equipment Notes held in the Trust, or any Final Withdrawal, the Trustee shall furnish to Certificateholders of record on such date a statement setting forth (x) the expected Pool Balances for each subsequent Regular Distribution Date following the Delivery Period Termination Date, (y) the related Pool Factors for such Regular Distribution Dates and (z) the expected principal distribution schedule of the Equipment Notes, in the aggregate, held as Trust Property at the date of such notice. With respect to the Certificates registered in the name of a Clearing Agency, on the Delivery Period Termination Date, the Trustee will request from such Clearing Agency a securities position listing setting forth the names of all Clearing Agency Participants reflected on such Clearing Agency's books as holding interests in the Certificates on such date. The Trustee will mail to each such Clearing Agency Participant the statement described above and will make available additional copies as requested by such Clearing Agency Participant for forwarding to holders of interests in the Certificates. Section 4.04. Investment of Special Payment Moneys. Any money received by the Trustee pursuant to Section 4.01(b) representing a Special Payment which is not distributed on the date received shall, to the extent practicable, be invested in Permitted Investments by the Trustee pending distribution of such Special Payment pursuant to Section 4.02. Any investment made pursuant to this Section 4.04 shall be in such Permitted Investments having maturities not later than the date that such moneys are required to be used to make the payment required under Section 4.02 on the applicable Special Distribution Date and the Trustee shall hold any such Permitted Investments until maturity. The Trustee shall have no liability with respect to any investment made pursuant to this Section 4.04, other than by reason of the willful misconduct or negligence of the Trustee. All income and earnings from such investments shall be distributed on such Special Distribution Date as part of such Special Payment. ARTICLE V THE COMPANY Section 5.01. Maintenance of Corporate Existence. The Company, at its own cost and expense, will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights and franchises, except as otherwise specifically permitted in Section 5.02; provided, however, that the Company shall not be required to preserve any right or franchise if the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company. 42 36 Section 5.02. Consolidation, Merger, Etc. The Company shall not consolidate with or merge into any other corporation or convey, transfer or lease substantially all of its assets as an entirety to any Person unless: (a) the corporation formed by such consolidation or into which the Company is merged or the Person that acquires by conveyance, transfer or lease substantially all of the assets of the Company as an entirety shall be (i) organized and validly existing under the laws of the United States of America or any state thereof or the District of Columbia, (ii) a "citizen of the United States" as defined in 49 U.S.C. Section 40102(a)(15), as amended, and (iii) a United States certificated air carrier, if and so long as such status is a condition of entitlement to the benefits of Section 1110 of the Bankruptcy Reform Act of 1978, as amended (11 U.S.C. Section 1110), with respect to the Leases or the Aircraft owned by the Company; (b) the corporation formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance, transfer or lease substantially all of the assets of the Company as an entirety shall execute and deliver to the Trustee applicable to the Certificates a duly authorized, valid, binding and enforceable agreement in form and substance reasonably satisfactory to the Trustee containing an assumption by such successor corporation or Person of the due and punctual performance and observance of each covenant and condition of the Note Documents and of this Agreement applicable to the Certificates to be performed or observed by the Company; and (c) the Company shall have delivered to the Trustee an Officer's Certificate of the Company and an Opinion of Counsel of the Company reasonably satisfactory to the Trustee, each stating that such consolidation, merger, conveyance, transfer or lease and the assumption agreement mentioned in clause (b) above comply with this Section 5.02 and that all conditions precedent herein provided for relating to such transaction have been complied with. Upon any consolidation or merger, or any conveyance, transfer or lease of substantially all of the assets of the Company as an entirety in accordance with this Section 5.02, the successor corporation or Person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Agreement applicable to the Certificates with the same effect as if such successor corporation or Person had been named as the Company herein. No such conveyance, transfer or lease of substantially all of the assets of the Company as an entirety shall have the effect of releasing any successor corporation or Person which shall have become such in the manner prescribed in this Section 5.02 from its liability in respect of this Agreement and any Note Document applicable to the Certificates to which it is a party. 43 37 ARTICLE VI DEFAULT Section 6.01. Events of Default. (a) Exercise of Remedies. Upon the occurrence and during the continuation of any Indenture Default under any Indenture, the Trustee may, to the extent it is the Controlling Party at such time (as determined pursuant to the Intercreditor Agreement), direct the exercise of remedies as provided in the Intercreditor Agreement. (b) Purchase Rights of Certificateholders. By acceptance of its Certificate, each Certificateholder agrees that at any time after the occurrence and during the continuation of a Triggering Event, (i) each Class C Certificateholder shall have the right to purchase all, but not less than all, of the Certificates and the Class A Certificates upon ten days' written notice to the Trustee, the Class A Trustee and each other Class C Certificateholder, provided that (A) if prior to the end of such ten-day period any other Class C Certificateholder notifies such purchasing Class C Certificateholder that such other Class C Certificateholder wants to participate in such purchase, then such other Class C Certificateholder may join with the purchasing Class C Certificateholder to purchase all, but not less than all, of the Certificates and the Class A Certificates pro rata based on the Fractional Undivided Interest in the Class C Trust held by each such Class C Certificateholder and (B) if prior to the end of such ten-day period any other Class C Certificateholder fails to notify the purchasing Class C Certificateholder of such other Class C Certificateholder's desire to participate in such a purchase, then such other Class C Certificateholder shall lose its right to purchase the Certificates pursuant to this Section 6.01(b); and (ii) each Class D Certificateholder shall have the right (which shall not expire upon any purchase of the Certificates pursuant to clause (i) above) to purchase all, but not less than all, of the Certificates, the Class B Certificates and the Class C Certificates upon ten days' written notice to the Trustee, the Class A Trustee, the Class C Trustee and each other Class D Certificateholder, provided that (A) if prior to the end of such ten-day period any other Class D Certificateholder notifies such purchasing Class D Certificateholder that such other Class D Certificateholder wants to participate in such purchase, then such other Class D Certificateholder may join with the purchasing Class D Certificateholder to purchase all, but not less than all, of the Certificates, the Class A Certificates and the Class C Certificates pro rata based on the Fractional Undivided Interest in the Class D Trust held by each such Class D Certificateholder and (B) if prior to the end of such ten-day period any other Class D 44 38 Certificateholder fails to notify the purchasing Class D Certificateholder of such other Class D Certificateholder's desire to participate in such a purchase, then such other Class D Certificateholder shall lose its right to purchase the Certificates pursuant to this Section 6.01(b). The purchase price with respect to the Certificates shall be equal to the Pool Balance of the Certificates, together with accrued and unpaid interest thereon to the date of such purchase, without premium, but including any other amounts then due and payable to the Certificateholders under this Agreement, the Intercreditor Agreement, the Escrow Agreement or any Note Document or on or in respect of the Certificates; provided, however, that (i) if such purchase occurs after the record date specified in Section 2.03(b) of the Escrow Agreement relating to the distribution of unused Deposits and accrued and unpaid interest thereunder, such purchase price shall be reduced by the aggregate amount of unused Deposits and interest to be distributed under the Escrow Agreement (which deducted amounts shall remain distributable to, and may be retained by, the Certificateholder as of such Record Date) and (ii) if such purchase occurs after a Record Date, such purchase price shall be reduced by the amount to be distributed hereunder on the related Distribution Date (which deducted amounts shall remain distributable to, and may be retained by, the Certificateholder as of such Record Date); provided further that no such purchase of Certificates shall be effective unless the purchaser(s) shall certify to the Trustee that contemporaneously with such purchase, such purchaser(s) is purchasing, pursuant to the terms of this Agreement and the Other Agreements, the Certificates, the Class A Certificates and the Class C Certificates which are senior to the securities held by such purchaser(s). Each payment of the purchase price of the Certificates referred to in the first sentence hereof shall be made to an account or accounts designated by the Trustee and each such purchase shall be subject to the terms of this Section 6.01(b). Each Certificateholder agrees by its acceptance of its Certificate that it will, subject to Section 3.04 of this Agreement, upon payment from such, Class C Certificateholder(s) or Class D Certificateholder(s), as the case may be, of the purchase price set forth in the first sentence of this paragraph, forthwith sell, assign, transfer and convey to the purchaser(s) thereof (without recourse, representation or warranty of any kind except for its own acts), all of the right, title, interest and obligation of such Certificateholder in this Agreement, the Escrow Agreement, the Deposit Agreement, the Intercreditor Agreement, the Liquidity Facilities, the Note Documents and all Certificates and Escrow Receipts held by such Certificateholder (excluding all right, title and interest under any of the foregoing to the extent such right, title or interest is with respect to an obligation not then due and payable as respects any action or inaction or state of affairs occurring prior to such sale) and the purchaser shall assume all of such Certificateholder's obligations under this Agreement, the Escrow Agreement, the Deposit Agreement, the Intercreditor Agreement, the Liquidity Facilities, the Note Documents and all such Certificates and Escrow Receipts. The Certificates will be deemed to be purchased on the date payment of the purchase price is made notwithstanding the failure of the Certificateholders to deliver any Certificates and, upon such a purchase, (i) the only rights of the Certificateholders will be to deliver the 45 39 Certificates to the purchaser(s) and receive the purchase price for such Certificates and (ii) if the purchaser(s) shall so request, such Certificateholder will comply with all the provisions of Section 3.04 of this Agreement to enable new Certificates to be issued to the purchaser in such denominations as it shall request. All charges and expenses in connection with the issuance of any such new Certificates shall be borne by the purchaser thereof. As used in this Section 6.01, the terms "Class A Certificateholder", "Class A Trust", "Class A Certificate", "Class A Trustee", "Class C Certificate", "Class C Certificateholder", "Class C Trust", "Class C Trustee", "Class D Certificateholder" and "Class D Trust", shall have the respective meanings assigned to such terms in the Intercreditor Agreement. Section 6.02. Incidents of Sale of Equipment Notes. Upon any sale of all or any part of the Equipment Notes held in the Trust made either under the power of sale given under this Agreement or otherwise for the enforcement of this Agreement, the following shall be applicable: (a) Certificateholders and Trustee May Purchase Equipment Notes. Any Certificateholder, the Trustee in its individual or any other capacity or any other Person may bid for and purchase any of the Equipment Notes held in the Trust, and upon compliance with the terms of sale, may hold, retain, possess and dispose of such Equipment Notes in their own absolute right without further accountability. (b) Receipt of Trustee Shall Discharge Purchaser. The receipt of the Trustee making such sale shall be a sufficient discharge to any purchaser for his purchase money, and, after paying such purchase money and receiving such receipt, such purchaser or its personal representative or assigns shall not be obliged to see to the application of such purchase money, or be in any way answerable for any loss, misapplication or nonapplication thereof. (c) Application of Moneys Received upon Sale. Any moneys collected by the Trustee upon any sale made either under the power of sale given by this Agreement or otherwise for the enforcement of this Agreement shall be applied as provided in Section 4.02. Section 6.03. Judicial Proceedings Instituted by Trustee; Trustee May Bring Suit. If there shall be a failure to make payment of the principal of, premium, if any, or interest on any Equipment Note held in the Trust, or if there shall be any failure to pay Rent (as defined in the relevant Lease) under any Lease when due and payable, then the Trustee, in, its own name and as trustee of an express trust, as holder of such Equipment Notes, to the extent permitted by and in accordance with the terms of any related Intercreditor Agreement and any related Note Documents (subject to rights of the applicable Owner 46 40 Trustee or Owner Participant to cure any such failure to pay principal of, premium, if any, or interest on any Equipment Note or to pay Rent under any Lease in accordance with the applicable Indenture), shall be entitled and empowered to institute any suits, actions or proceedings at law, in equity or otherwise, for the collection of the sums so due and unpaid on such Equipment Notes or under such Lease and may prosecute any such claim or proceeding to judgment or final decree with respect to the whole amount of any such sums so due and unpaid. Section 6.04. Control by Certificateholders. Subject to Section 6.03 and the Intercreditor Agreement, the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the related Trust shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee with respect to the Trust or pursuant to the terms of the Intercreditor Agreement, or exercising any trust or power conferred on the Trustee under this Agreement or the Intercreditor Agreement, including any right of the Trustee as Controlling Party under the Intercreditor Agreement or as holder of the Equipment Notes held in the related Trust; provided, however, that (a) such Direction shall not in the opinion of the Trustee be in conflict with any rule of law or with this Agreement and would not involve the Trustee in personal liability or expense, (b) the Trustee shall not determine that the action so directed would be unjustly prejudicial to the Certificateholders not taking part in such Direction, and (c) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such Direction. Section 6.05. Waiver of Past Defaults. Subject to any related Intercreditor Agreement, the Certificateholders holding Certificates of a series evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust (i) may on behalf of all of the Certificateholders waive any past Event of Default hereunder and its consequences or (ii) if the Trustee is the Controlling Party, may direct the Trustee to instruct the applicable Loan Trustee to waive any past Indenture Event of Default under any related Indenture and its consequences, and thereby annul any Direction given by such Certificateholders or the Trustee to such Loan Trustee with respect thereto, except a default: (a) in the deposit of any Scheduled Payment or Special Payment under Section 4.01 or in the distribution of any payment under Section 4.02 on the Certificates, or 47 41 (b) in the payment of the principal of (premium, if any) or interest on the Equipment Notes held in the Trust, or (c) in respect of a covenant or provision hereof which under Article IX hereof cannot be modified or amended without the consent of each Certificateholder holding an Outstanding Certificate of a series affected thereby. Upon any such waiver, such default shall cease to exist with respect to the Certificates and any Event of Default arising therefrom shall be deemed to have been cured for every purpose and any direction given by the Trustee on behalf of the Certificateholders to the relevant Loan Trustee shall be annulled with respect thereto; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Upon any such waiver, the Trustee shall vote the Equipment Notes issued under the relevant Indenture to waive the corresponding Indenture Event of Default. Section 6.06. Right of Certificateholders to Receive Payments Not to Be Impaired. Anything in this Agreement to the contrary notwithstanding, including, without limitation, Section 6.07 hereof, but subject to the Intercreditor Agreement, the right of any Certificateholder to receive distributions of payments required pursuant to Section 4.02 hereof on the applicable Certificates when due, or to institute suit for the enforcement of any such payment on or after the applicable Regular Distribution Date or Special Distribution Date, shall not be impaired or affected without the consent of such Certificateholder. Section 6.07. Certificateholders May Not Bring Suit Except Under Certain Conditions. A Certificateholder shall not have the right to institute any suit, action or proceeding at law or in equity or otherwise with respect to this Agreement, for the appointment of a receiver or for the enforcement of any other remedy under this Agreement, unless: (a) such Certificateholder previously shall have given written notice to the Trustee of a continuing Event of Default; (b) Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than 25% of the related Trust shall have requested the Trustee in writing to institute such action, suit or proceeding and shall have offered to the Trustee indemnity as provided in Section 7.03(e); (c) the Trustee shall have refused or neglected to institute any such action, suit or proceeding for 60 days after receipt of such notice, request and offer of indemnity; and 48 42 (d) no direction inconsistent with such written request shall have been given to the Trustee during such 60-day period by Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust. It is understood and intended that no one or more of the Certificateholders shall have any right in any manner whatsoever hereunder or under the related Trust Supplement or under the Certificates to (i) surrender, impair, waive, affect, disturb or prejudice any property in the Trust Property of the Trust, or the lien of any related Indenture on any property subject thereto, or the rights of the Certificateholders or the holders of the Equipment Notes, (ii) obtain or seek to obtain priority over or preference with respect to any other such Certificateholder or (iii) enforce any right under this Agreement, except in the manner herein provided and for the equal, ratable and common benefit of all the Certificateholders subject to the provisions of this Agreement. Section 6.08. Remedies Cumulative. Every remedy given hereunder to the Trustee or to any of the Certificateholders shall not be exclusive of any other remedy or remedies, and every such remedy shall be cumulative and in addition to every other remedy given hereunder or now or hereafter given by statute, law, equity or otherwise. Section 6.09. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Agreement, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of such suit, and may assess costs against any such party litigant, in the manner and to the extent provided in the Trust Indenture Act; provided, however, that neither this Section 6.09 nor the Trust Indenture Act shall be deemed to authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Company. ARTICLE VII THE TRUSTEE Section 7.01. Certain Duties and Responsibilities. (a) Except during the continuance of an Event of Default in respect of a Trust, the Trustee undertakes to perform such duties in respect of the Trust as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Trustee. (b) In case an Event of Default in respect of a Trust has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Agreement in respect of the Trust, and use the same degree of care and skill in their 49 43 exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (c) No provision of this Agreement shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that (i) this Subsection shall not be construed to limit the effect of Subsection (a) of this Section 7.01; and (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts. (d) Whether or not herein expressly so provided, every provision of this Agreement relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 7.01. Section 7.02. Notice of Defaults. As promptly as practicable after, and in any event within 90 days after, the occurrence of any default (as such term is defined below) hereunder known to the Trustee, the Trustee shall transmit by mail to the Company, any Owner Trustees, the Owner Participants, the Loan Trustees and the Certificateholders holding Certificates in accordance with Section 313(c) of the Trust Indenture Act, notice of such default hereunder known to the Trustee, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal, premium, if any, or interest on any Equipment Note, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith shall determine that the withholding of such notice is in the interests of the Certificateholders. For the purpose of this Section 7.02 in respect of any Trust, the term "default" means any event that is, or after notice or lapse of time or both would become, an Event of Default in respect of that Trust. Section 7.03. Certain Rights of Trustee. Subject to the provisions of Section 315 of the Trust Indenture Act: (a) the Trustee may rely and shall be protected in acting or refraining from acting in reliance upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; 50 44 (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Request; (c) whenever in the administration of this Agreement or the Intercreditor Agreement, the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officer's Certificate of the Company, any Owner Trustee or any Loan Trustee; (d) the Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement or the Intercreditor Agreement at the Direction of any of the Certificateholders pursuant to this Agreement or the Intercreditor Agreement, unless the Certificateholders shall have offered to the Trustee reasonable security or indemnity against the cost, expenses and liabilities which might be incurred by it in compliance with such Direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document; (g) the Trustee may execute any of the trusts or powers under this Agreement or the Intercreditor Agreement or perform any duties under this Agreement or the Intercreditor Agreement either directly or by or through agents or attorneys, and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it under this Agreement or the Intercreditor Agreement; (h) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the Direction of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Agreement or the Intercreditor Agreement; and 51 45 (i) the Trustee shall not be required to expend or risk its own funds in the performance of any of its duties under this Agreement, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk is not reasonably assured to it. Section 7.04. Not Responsible for Recitals or Issuance of Certificates. The recitals contained herein and in the Certificates, except the certificates of authentication, shall not be taken as the statements of the Trustee, and the Trustee assumes no responsibility for their correctness. Subject to Section 7.15, the Trustee makes no representations as to the validity or sufficiency of this Agreement, any Equipment Notes, the Intercreditor Agreement, the Deposit Agreement, the Escrow Agreement, the Certificates, or any Note Documents, except that the Trustee hereby represents and warrants that this Agreement has been, and the Registration Rights Agreement, each Certificate, the Note Purchase Agreement, the Escrow Agreement and the Intercreditor Agreement will be, executed and delivered by one of its officers who is duly authorized to execute and deliver such document on its behalf. Section 7.05. May Hold Certificates. The Trustee, any Paying Agent, Registrar or any of their Affiliates or any other agent, in their respective individual or any other capacity, may become the owner or pledgee of Certificates and, subject to Sections 310(b) and 311 of the Trust Indenture Act, if applicable, may otherwise deal with the Company, any Owner Trustees or the Loan Trustees with the same rights it would have if it were not Trustee, Paying Agent, Registrar or such other agent. Section 7.06. Money Held in Trust. Money held by the Trustee or the Paying Agent in trust under this Agreement need not be segregated from other funds except to the extent required herein or by law and neither the Trustee nor the Paying Agent shall have any liability for interest upon any such moneys except as provided for herein. Section 7.07. Compensation and Reimbursement. The Company agrees: (a) to pay, or cause to be paid, to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); and (b) to reimburse, or cause to be reimbursed, the Trustee upon its request for all reasonable out- of-pocket expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Agreement or the Intercreditor Agreement (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence, willful misconduct or bad faith or as 52 46 may be incurred due to the Trustee's breach of its representations and warranties set forth in Section 7.15; and (c) to indemnify the Trustee with respect to the Certificates, pursuant to Section 8.1 of the Owned Aircraft Participation Agreements and Section 9.1 of the Leased Aircraft Participation Agreements, as the case may be. The Trustee shall be entitled to reimbursement from, and shall have a lien prior to the Certificates upon, all property and funds held or collected by the Trustee in its capacity as Trustee for any tax incurred without negligence, bad faith or willful misconduct, on its part, arising out of or in connection with the acceptance or administration of the Trust (other than any tax attributable to the Trustee's compensation for serving as such), including any costs and expenses incurred in contesting the imposition of any such tax. The Trustee shall notify the Company of any claim for any tax for which it may seek reimbursement. If the Trustee reimburses itself from the Trust Property of such Trust for any such tax, it will mail a brief report within 30 days setting forth the amount of such tax and the circumstances thereof to all Certificateholders as their names and addresses appear in the Register. Section 7.08. Corporate Trustee Required; Eligibility. The Trust shall at all times have a Trustee which shall be eligible to act as a trustee under Section 310(a) of the Trust Indenture Act and shall have a combined capital and surplus of at least $75,000,000 (or a combined capital and surplus in excess of $5,000,000 and the obligations of which, whether now in existence or hereafter incurred, are fully and unconditionally guaranteed by a corporation organized and doing business under the laws of the United States, any state or territory thereof or of the District of Columbia and having a combined capital and surplus of at least $75,000,000). If such corporation publishes reports of conditions at least annually, pursuant to law or to the requirements of federal, state, territorial or District of Columbia supervising or examining authority, then for the purposes of this Section 7.08 the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of conditions so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 7.08 to act as Trustee of the Trust, the Trustee shall resign immediately as Trustee of the Trust in the manner and with the effect specified in Section 7.09. Section 7.09. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee of the Trust pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 7.10. 53 47 (b) The Trustee may resign at any time as Trustee of the Trust by giving prior written notice thereof to the Company, the Authorized Agents, the Owner Trustees and the Loan Trustees. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Company, the Owner Trustees and the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by Direction of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in such Trust delivered to the Trustee and to the Company, the Owner Trustees and the Loan Trustees. (d) If at any time in respect of the Trust: (i) the Trustee shall fail to comply with Section 310 of the Trust Indenture Act, if applicable, after written request therefor by the Company or by any Certificateholder who has been a bona fide Certificateholder for at least six months; or (ii) the Trustee shall cease to be eligible under Section 7.08 and shall fail to resign after written request therefor by the Company or by any such Certificateholder; or (iii) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then, in any case, (i) the Company may remove the Trustee or (ii) any Certificateholder who has been a bona fide Certificateholder for at least six months may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee of the Trust. (e) If a Responsible Officer of the Trustee shall obtain actual knowledge of an Avoidable Tax (as defined below) in respect of any Trust which has been or is likely to be asserted, the Trustee shall promptly notify the Company and shall, within 30 days of such notification, resign as Trustee of such Trust hereunder unless within such 30-day period the Trustee shall have received notice that the Company has agreed to pay such tax. The Company shall promptly appoint a successor Trustee of such Trust in a jurisdiction where there are no Avoidable Taxes. As used herein, an "Avoidable Tax" in respect of such Trust means a state or local tax: (i) upon (w) such Trust, (x) such Trust Property, (y) Certificateholders of the Trust or (z) the Trustee for which the Trustee is entitled to seek 54 48 reimbursement from the Trust Property of such Trust, and (ii) which would be avoided if the Trustee were located in another state, or jurisdiction within a state, within the United States of America. A tax shall not be an Avoidable Tax in respect of any Trust if the Company or any Owner Trustee shall agree to pay, and shall pay, such tax. (f) If the Trustee shall resign, be removed or become incapable of acting as Trustee of the Trust or if a vacancy shall occur in the office of the Trustee of the Trust for any cause, the Company shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or other occurrence of such vacancy, a successor Trustee shall be appointed by Direction of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in such Trust delivered to the Company, the Owner Trustees, the Loan Trustee and the retiring Trustee, then the successor Trustee so appointed shall, with the approval of the Company of such appointment, which approval shall not be unreasonably withheld, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed as provided above. If no successor Trustee shall have been so appointed as provided above and accepted appointment in the manner hereinafter provided, the resigning Trustee or any Certificateholder who has been a bona fide Certificateholder of the related series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (g) The successor Trustee shall give notice of the resignation and removal of the Trustee and appointment of the successor Trustee by mailing written notice of such event by first-class mail, postage prepaid, to the Certificateholders as their names and addresses appear in the Register. Each notice shall include the name of such successor Trustee and the address of its Corporate Trust Office. Section 7.10. Acceptance of Appointment by Successor. Every successor Trustee appointed hereunder shall execute and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Company or the successor Trustee, such retiring Trustee shall execute and deliver an instrument transferring to such successor Trustee all such rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all Trust Property held by such retiring Trustee, subject nevertheless to its lien, if any, provided for in Section 7.07. Upon request of any such successor Trustee, the Company, the retiring Trustee and such successor Trustee shall execute and deliver any and all instruments containing such provisions as shall be necessary or desirable to transfer and confirm to, and for more fully and certainly vesting in, such successor Trustee all such rights, powers and trusts. 55 49 No institution shall accept its appointment as a Trustee hereunder unless at the time of such acceptance such institution shall be qualified and eligible under this Article VII. Section 7.11. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder; provided, however, that such corporation shall be otherwise qualified and eligible under this Article VII, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Certificates shall have been executed or authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such execution or authentication and deliver the Certificates so executed or authenticated with the same effect as if such successor Trustee had itself executed or authenticated such Certificates. Section 7.12. Maintenance of Agencies. (a) With respect to each series of Certificates, there shall at all times be maintained an office or agency in the location set forth in Section 12.04 where Certificates may be presented or surrendered for registration of transfer or for exchange, and for payment thereof, and where notices and demands, to or upon the Trustee in respect of such Certificates or this Agreement may be served; provided, however, that, if it shall be necessary that the Trustee maintain an office or agency in another location with respect to the Certificates (e.g., the Certificates shall be represented by Definitive Certificates and shall be listed on a national securities exchange), the Trustee will make all reasonable efforts to establish such an office or agency. Written notice of the location of each such other office or agency and of any change of location thereof shall be given by the Trustee to the Company, any Owner Trustees, the Loan Trustees (in the case of any Owner Trustee or Loan Trustee, at its address specified in the Note Documents or such other address as may be notified to the Trustee) and the Certificateholders. In the event that no such office or agency shall be maintained or no such notice of location or of change of location shall be given, presentations and demands may be made and notices may be served at the Corporate Trust Office of the Trustee. (b) There shall at all times be a Registrar and a Paying Agent hereunder with respect to the Certificates. Each such Authorized Agent shall be a bank or trust company, shall be a corporation organized and doing business under the laws of the United States or any state, with a combined capital and surplus of at least $75,000,000, or a corporation having a combined capital and surplus in excess of $5,000,000, the obligations of which are guaranteed by a corporation organized and doing business under the laws of the United States or any state, with a combined capital and surplus of at least $75,000,000, and shall be authorized under such laws to exercise corporate trust powers, subject to supervision by federal or state authorities. The Trustee shall initially be the Paying Agent and, as 56 50 provided in Section 3.04, Registrar hereunder with respect to the Certificates. Each Registrar shall furnish to the Trustee, at stated intervals of not more than six months, and at such other times as the Trustee may request in writing, a copy of the Register maintained by such Registrar. (c) Any corporation into which any Authorized Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which any Authorized Agent shall be a party, or any corporation succeeding to the corporate trust business of any Authorized Agent, shall be the successor of such Authorized Agent, if such successor corporation is otherwise eligible under this Section 7.12, without the execution or filing of any paper or any further act on the part of the parties hereto or such Authorized Agent or such successor corporation. (d) Any Authorized Agent may at any time resign by giving written notice of resignation to the Trustee, the Company, any Owner Trustees and the Loan Trustees. The Company may, and at the request of the Trustee shall, at any time terminate the agency of any Authorized Agent by giving written notice of termination to such Authorized Agent and to the Trustee. Upon the resignation or termination of an Authorized Agent or in case at any time any such Authorized Agent shall cease to be eligible under this Section 7.12 (when, in either case, no other Authorized Agent performing the functions of such Authorized Agent shall have been appointed), the Company shall promptly appoint one or more qualified successor Authorized Agents, reasonably satisfactory to the Trustee, to perform the functions of the Authorized Agent which has resigned or whose agency has been terminated or who shall have ceased to be eligible under this Section 7.12. The Company shall give written notice of any such appointment made by it to the Trustee, any Owner Trustees and the Loan Trustees; and in each case the Trustee shall mail notice of such appointment to all Certificateholders as their names and addresses appear on the Register for such series. (e) The Company agrees to pay, or cause to be paid, from time to time to each Authorized Agent reasonable compensation for its services and to reimburse it for its reasonable expenses. Section 7.13. Money for Certificate Payments to Be Held in Trust. All moneys deposited with any Paying Agent for the purpose of any payment on Certificates shall be deposited and held in trust for the benefit of the Certificateholders entitled to such payment, subject to the provisions of this Section 7.13. Moneys so deposited and held in trust shall constitute a separate trust fund for the benefit of the Certificateholders with respect to which such money was deposited. The Trustee may at any time, for the purpose of obtaining the satisfaction and discharge of this Agreement or for any other purpose, direct any Paying Agent to pay to the Trustee all sums held in trust by such Paying Agent, such sums to be held by the Trustee 57 51 upon the same trusts as those upon which such sums were held by such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Section 7.14. Registration of Equipment Notes in Trustee's Name. Subject to the provisions of any Intercreditor Agreement, the Trustee agrees that all Equipment Notes to be purchased by any Trust and Permitted Investments, if any, shall be issued in the name of the Trustee as trustee for the applicable Trust or its nominee and held by the Trustee in trust for the benefit of the Certificateholders, or, if not so held, the Trustee or its nominee shall be reflected as the owner of such Equipment Notes or Permitted Investments, as the case may be, in the register of the issuer of such Equipment Notes or Permitted Investments, as the case may be. Section 7.15. Representations and Warranties of Trustee. The Trustee hereby represents and warrants that: (a) the Trustee is a Delaware banking corporation organized and validly existing in good standing under the laws of the State of Delaware; (b) the Trustee has full power, authority and legal right to execute, deliver and perform this Agreement, the Escrow Agreement, the Intercreditor Agreement, the Note Documents and the Note Purchase Agreement and has taken all necessary action to authorize the execution, delivery and performance by it of this Agreement, the Escrow Agreement, the Intercreditor Agreement, the Note Documents and the Note Purchase Agreement; (c) the execution, delivery and performance by the Trustee of this Agreement, the Escrow Agreement, the Intercreditor Agreement, the Note Documents and the Note Purchase Agreement (i) will not violate any provision of any United States federal law or the law of the state of the United States where it is located governing the banking and trust powers of the Trustee or any order, writ, judgment, or decree of any court, arbitrator or governmental authority applicable to the Trustee or any of its assets, (ii) will not violate any provision of the articles of association or by-laws of the Trustee, and (iii) will not violate any provision of, or constitute, with or without notice or lapse of time, a default under, or result in the creation or imposition of any lien on any properties included in the Trust Property pursuant to the provisions of any mortgage, indenture, contract, agreement or other undertaking to which it is a party, which violation, default or lien could reasonably be expected to have an adverse effect on the Trustee's performance or ability to perform its duties hereunder or thereunder or on the transactions contemplated herein or therein; 58 52 (d) the execution, delivery and performance by the Trustee of this Agreement, the Escrow Agreement, the Intercreditor Agreement, the Note Documents and the Note Purchase Agreement will not require the authorization, consent, or approval of, the giving of notice to, the filing or registration with, or the taking of any other action in respect of, any governmental authority or agency of the United States or the state of the United States where it is located regulating the banking and corporate trust activities of the Trustee; and (e) this Agreement, the Escrow Agreement, the Intercreditor Agreement, the Note Documents and the Note Purchase Agreement have been duly executed and delivered by the Trustee and constitute the legal, valid and binding agreements of the Trustee, enforceable against it in accordance with their respective terms; provided, however, that enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and (ii) general principles of equity. Section 7.16. Withholding Taxes; Information Reporting. As to the Certificates, the Trustee, as trustee of the related grantor trust created by this Agreement, shall exclude and withhold from each distribution of principal, premium, if any, and interest and other amounts due under this Agreement or under the Certificates any and all withholding taxes applicable thereto as required by law. The Trustee agrees to act as such withholding agent and, in connection therewith, whenever any present or future taxes or similar charges are required to be withheld with respect to any amounts payable in respect of the Certificates, to withhold such amounts and timely pay the same to the appropriate authority in the name of and on behalf of the Certificateholders, that it will file any necessary withholding tax returns or statements when due, and that, as promptly as possible after the payment thereof, it will deliver to each such Certificateholder appropriate documentation showing the payment thereof, together with such additional documentary evidence as such Certificateholders may reasonably request from time to time. The Trustee agrees to file any other information reports as it may be required to file under United States law. Section 7.17. Trustee's Liens. The Trustee in its individual capacity agrees that it will, in respect of each Trust created by this Agreement, at its own cost and expense promptly take any action as may be necessary to duly discharge and satisfy in full any mortgage, pledge, lien, charge, encumbrance, security interest or claim ("Trustee's Liens") on or with respect to the Trust Property of such Trust which is attributable to the Trustee either (i) in its individual capacity and which is unrelated to the transactions contemplated by this Agreement, the Intercreditor Agreement, the Note Purchase Agreement or the Note Documents or (ii) as Trustee hereunder or in its individual capacity and which arises out of acts or omissions which are not contemplated by this Agreement. 59 53 Section 7.18. Preferential Collection of Claims. The Trustee shall comply with Section 311(a) of the Trust Indenture Act, excluding any creditor relationship listed in Section 311(b) of the Trust Indenture Act. If the Trustee shall resign or be removed as Trustee, it shall be subject to Section 311(a) of the Trust Indenture Act to the extent provided therein. ARTICLE VIII CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE Section 8.01. The Company to Furnish Trustee with Names and Addresses of Certificateholders. The Company will furnish to the Trustee within 15 days after each Record Date with respect to a Scheduled Payment, and at such other times as the Trustee may request in writing within 30 days after receipt by the Company of any such request, a list, in such form as the Trustee may reasonably require, of all information in the possession or control of the Company as to the names and addresses of the Certificateholders, in each case as of a date not more than 15 days prior to the time such list is furnished; provided, however, that so long as the Trustee is the sole Registrar, no such list need be furnished; and provided further, however, that no such list need be furnished for so long as a copy of the Register is being furnished to the Trustee pursuant to Section 7.12. Section 8.02. Preservation of Information; Communications to Certificateholders. The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Certificateholders contained in the most recent list furnished to the Trustee as provided in Section 7.12 or Section 8.01, as the case may be, and the names and addresses of Certificateholders of each series received by the Trustee in its capacity as Registrar, if so acting. The Trustee may destroy any list furnished to it as provided in Section 7.12 or Section 8.01, as the case may be, upon receipt of a new list so furnished. Section 8.03. Reports by Trustee. Within 60 days after May 15 of each year commencing with the first full year following the issuance of any series of Certificates, the Trustee shall transmit to the Certificateholders, as provided in Section 313(c) of the Trust Indenture Act, a brief report dated as of such May 15, if required by Section 313(a) of the Trust Indenture Act. Section 8.04. Reports by the Company. The Company shall: (a) file with the Trustee, within 30 days after the Company is required to file the same with the SEC, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the 60 54 SEC may from time to time by rules and regulations prescribe) which the Company is required to file with the SEC pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934, as amended; or, if the Company is not required to file information, documents or reports pursuant to either of such sections, then to file with the Trustee and the SEC, in accordance with rules and regulations prescribed by the SEC, such of the supplementary and periodic information, documents and reports which may be required pursuant to section 13 of the Securities Exchange Act of 1934, as amended, in respect of a security listed and registered on a national securities exchange as may be prescribed in such rules and regulations; (b) file with the Trustee and the SEC, in accordance with the rules and regulations prescribed by the SEC, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of the Company provided for in this Agreement, as may be required by such rules and regulations, including, in the case of annual reports, if required by such rules and regulations, certificates or opinions of independent public accountants, conforming to the requirements of Section 1.02; (c) transmit to all Certificateholders, in the manner and to the extent provided in Section 313(c) of the Trust Indenture Act such summaries of any information, documents and reports required to be filed by the Company pursuant to subsections (a) and (b) of this Section 8.04 as may be required by rules and regulations prescribed by the SEC; and (d) furnish to the Trustee, not less often than annually, a brief certificate from the principal executive officer, principal financial officer or principal accounting officer as to his knowledge of the Company's compliance with all conditions and covenants under this Agreement (it being understood that for purposes of this paragraph (d), such compliance shall be determined without regard to any period of grace or requirement of notice provided under this Agreement). ARTICLE IX SUPPLEMENTAL AGREEMENTS Section 9.01. Supplemental Agreements Without Consent of Certificateholders. Without the consent of the Certificateholders, the Company may (but will not be required to), and the Trustee (subject to Section 9.03) shall, at the Company's request, at any time and from time to time, enter into one or more agreements supplemental hereto or to the Intercreditor Agreement, the Escrow Agreement, the Note Purchase 61 55 Agreement, the Deposit Agreement or a Liquidity Facility, in form satisfactory to the Trustee, for any of the following purposes: (a) to provide for the formation of a Trust, the issuance of a series of Certificates and other matters contemplated by Section 2.01(b); or (b) to evidence the succession of another corporation to the Company and the assumption by any such successor of the covenants of the Company herein contained or of the Company's obligations under the Intercreditor Agreement, the Note Purchase Agreement, the Indemnity Agreement or any Liquidity Facility or to evidence the succession of another corporation to the Depositary or any Liquidity Provider and the assumption by any such successor of the obligations of the Depositary or such Liquidity Provider, as the case may be, under the Intercreditor Agreement, the Note Purchase Agreement, the Deposit Agreement, the Indemnity Agreement or any Liquidity Facility; or (c) to add to the covenants of the Company for the benefit of the Certificateholders, or to surrender any right or power conferred upon the Company in this Agreement, the Intercreditor Agreement, the Note Purchase Agreement or any Liquidity Facility; or (d) to correct or supplement any provision in this Agreement, the Intercreditor Agreement, the Escrow Agreement, the Note Purchase Agreement, the Deposit Agreement or any Liquidity Facility which may be defective or inconsistent with any other provision herein or therein or to cure any ambiguity or to modify any other provision with respect to matters or questions arising under this Agreement, the Intercreditor Agreement, the Escrow Agreement, the Note Purchase Agreement, the Deposit Agreement or any Liquidity Facility, provided, however, that any such action shall not materially adversely affect the interests of the Certificateholders; to correct any mistake in this Agreement, the Intercreditor Agreement or any Liquidity Facility; or, as provided in the Intercreditor Agreement, to give effect to or provide for a Replacement Liquidity Facility (as defined in the Intercreditor Agreement); or (e) to comply with any requirement of the SEC, any applicable law, rules or regulations of any exchange or quotation system on which the Certificates are listed or of any regulatory body; or (f) to modify, eliminate or add to the provisions of this Agreement, the Intercreditor Agreement or any Liquidity Facility to such extent as shall be necessary to continue the qualification of this Agreement, the Intercreditor Agreement or any Liquidity Facility (including any supplemental agreement) under the Trust Indenture Act or under any similar Federal statute hereafter enacted, and to add to this 62 56 Agreement, the Intercreditor Agreement or any Liquidity Facility such other provisions as may be expressly permitted by the Trust Indenture Act, excluding, however, the provisions referred to in Section 316(a)(2) of the Trust Indenture Act as in effect at the date as of which this Agreement was executed or any corresponding provision in any similar Federal statute hereafter enacted; or (g) to evidence and provide for the acceptance of appointment under this Agreement, the Intercreditor Agreement or any Liquidity Facility by a successor Trustee and to add to or change any of the provisions of this Agreement, the Intercreditor Agreement or any Liquidity Facility as shall be necessary to provide for or facilitate the administration of the Trust, pursuant to the requirements of Section 7.10; or (h) to provide the information required under Section 7.12 and Section 12.04 as to the Trustee; or (i) to make any other amendments or modifications hereto, provided, however, that such amendments or modifications shall apply to Certificates to be thereafter issued; provided, however, that no such supplemental agreement shall adversely affect the status of any Trust as a grantor trust under Subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as amended, for U.S. federal income tax purposes. Section 9.02. Supplemental Agreements with Consent of Certificateholders. With respect to the Trust and the Certificates, with the consent of the Certificateholders (including consents obtained in connection with a tender offer or exchange offer for the Certificates) evidencing Fractional Undivided Interests aggregating not less than a majority in interest in such Trust, by Direction of said Certificateholders delivered to the Company and the Trustee, the Company may (with the consent of the Owner Trustees, if any, relating to the Certificates, which consent shall not be unreasonably withheld), but shall not be obligated to, and the Trustee (subject to Section 9.03) shall, enter into an agreement or agreements supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement, the Intercreditor Agreement, the Escrow Agreement, the Deposit Agreement, the Note Purchase Agreement or any Liquidity Facility to the extent applicable to such Certificateholders or of modifying in any manner the rights and obligations of such Certificateholders under this Agreement, the Intercreditor Agreement, the Escrow Agreement, the Deposit Agreement, the Note Purchase Agreement or any Liquidity Facility; provided, however, that no such agreement shall, without the consent of the Certificateholder of each Outstanding Certificate affected thereby: 63 57 (a) reduce in any manner the amount of, or delay the timing of, any receipt by the Trustee of payments on the Equipment Notes held in such Trust or distributions that are required to be made herein on any Certificate, or change any date of payment on any Certificate, or change the place of payment where, or the coin or currency in which, any Certificate is payable, or impair the right to institute suit for the enforcement of any such payment or distribution on or after the Regular Distribution Date or Special Distribution Date applicable thereto; or (b) permit the disposition of any Equipment Note included in the Trust Property of such Trust except as permitted by this Agreement, or otherwise deprive such Certificateholder of the benefit of the ownership of the Equipment Notes in such Trust; or (c) alter the priority of distributions specified in the Intercreditor Agreement in a manner materially adverse to the interests of the Certificateholders; or (d) reduce the specified percentage of the aggregate Fractional Undivided Interests of such Trust that is required for any such supplemental agreement, or reduce such specified percentage required for any waiver (of compliance with certain provisions of this Agreement or certain defaults hereunder and their consequences) provided for in this Agreement; or (e) modify any of the provisions of this Section 9.02 or Section 6.05, except to increase any such percentage or to provide that certain other provisions of this Agreement cannot be modified or waived without the consent of the Certificateholder of each Certificate affected thereby; or (f) adversely affect the status of any Trust as a grantor trust under Subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as amended, for U.S. federal income tax purposes. It shall not be necessary for any Direction of such Certificateholders under this Section 9.02 to approve the particular form of any proposed supplemental agreement, but it shall be sufficient if such Direction shall approve the substance thereof. Section 9.03. Documents Affecting Immunity or Indemnity. If in the opinion of the Trustee any document required to be executed by it pursuant to the terms of Section 9.01 or 9.02 affects any interest, right, duty, immunity or indemnity in favor of the Trustee under this Agreement or any Trust Supplement, the Trustee may in its discretion decline to execute such document. 64 58 Section 9.04. Execution of Supplemental Agreements. In executing, or accepting the additional trusts created by, any supplemental agreement permitted by this Article or the modifications thereby of the trusts created by this Agreement, the Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental agreement is authorized or permitted by this Agreement. Section 9.05. Effect of Supplemental Agreements. Upon the execution of any agreement supplemental to this Agreement under this Article, this Agreement shall be modified in accordance therewith, and such supplemental agreement shall form a part of this Agreement for all purposes; and every Certificateholder theretofore or thereafter authenticated and delivered hereunder shall be bound thereby to the extent applicable to such series. Section 9.06. Conformity with Trust Indenture Act. Every supplemental agreement executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. Section 9.07. Reference in Certificates to Supplemental Agreements. Certificates authenticated and delivered after the execution of any supplemental agreement pursuant to this Article may bear a notation in form approved by the Trustee as to any matter provided for in such supplemental agreement; and, in such case, suitable notation may be made upon Outstanding Certificates after proper presentation and demand. ARTICLE X AMENDMENTS TO INDENTURE AND NOTE DOCUMENTS Section 10.01. Amendments and Supplements to Indenture and Other Note Documents. In the event that the Trustee, as holder (or beneficial owner through the Subordination Agent) of any Equipment Notes (or as a prospective purchaser of any Postponed Notes) in trust for the benefit of the Certificateholders or as Controlling Party under an Intercreditor Agreement, receives (directly or indirectly through the Subordination Agent) a request for a consent to any amendment, modification, waiver or supplement under any Indenture, other Note Document or any other related document, which request would require the consent of Certificateholders under Section 9.02 hereof, the Trustee shall forthwith send a notice of such proposed amendment, modification, waiver or supplement to each Certificateholder registered on the Register as of the date of such notice. The Trustee shall request from the Certificateholders a Direction as to (a) whether or not to take or refrain from taking (or direct the Subordination Agent to take or refrain from taking) any action which a holder of (or, with respect to Postponed Notes, a prospective purchaser of) 65 59 such Equipment Note or a Controlling Party has the option to direct, (b) whether or not to give or execute (or direct the Subordination Agent to give or execute) any waivers, consents, amendments, modifications or supplements as a holder of (or, with respect to Postponed Notes, a prospective purchaser of) such Equipment Note or as Controlling Party and (c) how to vote (or direct the Subordination Agent to vote) any Equipment Note (or, with respect to a Postponed Note, its commitment to acquire such Postponed Note) if a vote has been called for with respect thereto. Provided such a request for Certificateholder Direction shall have been made, in directing any action or casting any vote or giving any consent as the holder of any Equipment Note (or in directing the Subordination Agent in any of the foregoing), (i) other than as Controlling Party, the Trustee shall vote for or give consent to any such action with respect to such Equipment Note (or Postponed Note) in the same proportion as that of (A) the aggregate face amounts of all Certificates actually voted in favor of or for giving consent to such action by such Direction of Certificateholders to (B) the aggregate face amount of all Outstanding Certificates and (ii) as Controlling Party, the Trustee shall vote as directed in such Certificateholder Direction by the Certificateholders evidencing a Fractional Undivided Interest aggregating not less than a majority in interest in the Trust. For purposes of the immediately preceding sentence, a Certificate shall have been "actually voted" if the Holder of such Certificate has delivered to the Trustee an instrument evidencing such Holder's consent to such Direction prior to one Business Day before the Trustee directs such action or casts such vote or gives such consent. Notwithstanding the foregoing, but subject to Section 6.04 and any Intercreditor Agreement, the Trustee may, with respect to the Certificates, in its own discretion and at its own direction, consent and notify the relevant Loan Trustee of such consent (or direct the Subordination Agent to consent and notify the Loan Trustee of such consent) to any amendment, modification, waiver or supplement under any related Indenture or any other related Note Document if an Event of Default hereunder shall have occurred and be continuing or if such amendment, modification, waiver or supplement will not materially adversely affect the interests of the Certificateholders. ARTICLE XI TERMINATION OF TRUSTS Section 11.01. Termination of the Trust. The respective obligations and responsibilities of the Company and the Trustee shall terminate upon the earlier of (A) the completion of the assignment, transfer and discharge described in the first sentence of the immediately following paragraph and (B) distribution to all Certificateholders and the Trustee of all amounts required to be distributed to them pursuant to this Agreement and the disposition of all property held as part of the Trust Property; provided, however, that in no event shall the Trust continue beyond one hundred ten (110) years following the date of the execution of this Agreement. 66 60 Upon the earlier of (i) the first Business Day following June 30, 1999, or, if later, the fifth Business Day following the Delivery Period Termination Date and (ii) the fifth Business Day following the date on which a Triggering Event occurs (such date, the "Transfer Date"), or, if later, the date on which all of the conditions set forth in the immediately following sentence have been satisfied, the Trustee is hereby directed (subject only to the immediately following sentence) to, and the Company shall direct the institution that will serve as the Related Trustee under the Related Pass Through Trust Agreement to, execute and deliver the Assignment and Assumption Agreement, pursuant to which the Trustee shall assign, transfer and deliver all of the Trustee's right, title and interest to the Trust Property to the Related Trustee under the Related Pass Through Trust Agreement. The Trustee and the Related Trustee shall execute and deliver the Assignment and Assumption Agreement upon the satisfaction of the following conditions: (i) The Trustee, the Related Trustee and each of the Rating Agencies then rating the Certificates shall have received an Officer's Certificate and an Opinion of Counsel dated the date of the Assignment and Assumption Agreement and each satisfying the requirements of Section 1.02, which Opinion of Counsel shall be substantially to the effect set forth below and may be relied upon by the Beneficiaries (as defined in the Assignment and Assumption Agreement): (a) upon the execution and delivery thereof by the parties thereto in accordance with the terms of this Agreement and the Related Pass Through Trust Agreement, the Assignment and Assumption Agreement will constitute the valid and binding obligation of each of the parties thereto enforceable against each such party in accordance with its terms; (b) upon the execution and delivery of the Assignment and Assumption Agreement in accordance with the terms of this Agreement and the Related Pass Through Trust Agreement, each of the Certificates then Outstanding will be entitled to the benefits of the Related Pass Through Trust Agreement; (c) the Related Trust is not required to be registered as an investment company under the Investment Company Act of 1940, as amended; (d) the Related Pass Through Trust Agreement constitutes the valid and binding obligation of the Company enforceable against the Company in accordance with its terms; and (e) neither the execution and delivery of the Assignment and Assumption Agreement in accordance with the terms of this Agreement and the Related Pass Through Trust Agreement, nor the consummation by the 67 61 parties thereto of the transactions contemplated to be consummated thereunder on the date thereof, will violate any law or governmental rule or regulation of the State of New York or the United States of America known to such counsel to be applicable to the transactions contemplated by the Assignment and Assumption Agreement. (ii) The Trustee and the Company shall have received (x) a copy of the articles of incorporation and bylaws of the Related Trustee certified as of the Transfer Date by the Secretary or Assistant Secretary of such institution and (y) a copy of the filing (including all attachments thereto) made by the institution serving as the Related Trustee with the Office of the Superintendent, State of New York Banking Department for the qualification of the Related Trustee under Section 131(3) of the New York Banking Law. Upon the execution of the Assignment and Assumption Agreement by the parties thereto, the Trust shall be terminated, the Certificateholders shall receive beneficial interests in the Related Trust in exchange for their interests in the Trust equal to their respective beneficial interests in the Trust, and the Outstanding Certificates representing Fractional Undivided Interests in the Trust shall be deemed for all purposes of this Agreement and the Related Pass Through Trust Agreement, without further signature or action of any party or Certificateholder, to be certificates representing the same fractional undivided interests in the Related Trust and its trust property. By acceptance of its Certificate, each Certificateholder consents to such assignment, transfer and delivery of the Trust Property to the trustee of the Related Trust upon the execution and delivery of the Assignment and Assumption Agreement. In connection with the occurrence of the event set forth in clause (B) above, notice of such termination, specifying the Distribution Date upon which the Certificateholders may surrender their Certificates to the Trustee for payment of the final distribution and cancellation, shall be mailed promptly by the Trustee to Certificateholders not earlier than the 60th day and not later than the 15th day next preceding such final Distribution Date specifying (A) the Distribution Date upon which the proposed final payment of the Certificates will be made upon presentation and surrender of Certificates at the office or agency of the Trustee therein specified, (B) the amount of any such proposed final payment, and (c) that the Record Date otherwise applicable to such Distribution Date is not applicable, payments being made only upon presentation and surrender of the Certificates at the office or agency of the Trustee therein specified. The Trustee shall give such notice to the Registrar at the time such notice is given to Certificateholders. Upon presentation and surrender of the Certificates in accordance with such notice, the Trustee shall cause to be distributed to Certificateholders such final payments. 68 62 In the event that all of the Certificateholders shall not surrender their Certificates for cancellation within six months after the date specified in the above-mentioned written notice, the Trustee shall give a second written notice to the remaining Certificateholders to surrender their Certificates for cancellation and receive the final distribution with respect thereto. No additional interest shall accrue on the Certificates after the Distribution Date specified in the first written notice. In the event that any money held by the Trustee for the payment of distributions on the Certificates shall remain unclaimed for two years (or such lesser time as the Trustee shall be satisfied, after sixty days' notice from the Company, is one month prior to the escheat period provided under applicable law) after the final distribution date with respect thereto, the Trustee shall pay to each Loan Trustee the appropriate amount of money relating to such Loan Trustee and shall give written notice thereof to the related Owner Trustees, the Owner Participants and the Company. ARTICLE XII MISCELLANEOUS PROVISIONS Section 12.01. Limitation on Rights of Certificateholders. The death or incapacity of any Certificateholder shall not operate to terminate this Agreement or the Trust, nor entitle such Certificateholder's legal representatives or heirs to claim an accounting or to take any action or commence any proceeding in any court for a partition or winding up of the Trust, nor otherwise affect the rights, obligations, and liabilities of the parties hereto or any of them. Section 12.02. Liabilities of Certificateholders. Neither the existence of the Trust nor any provision in this Agreement is intended to or shall limit the liability the Certificateholders would otherwise incur if the Certificateholders owned Trust Property as co-owners, or incurred any obligations of the Trust, directly rather than through the Trust. Section 12.03. Registration of Equipment Notes in Name of Subordination Agent. If the Trust is party to the Intercreditor Agreement, the Trustee agrees that all Equipment Notes to be purchased by such Trust shall be issued in the name of the Subordination Agent under the Intercreditor Agreement or its nominee and held by such Subordination Agent in trust for the benefit of the Certificateholders, or, if not so held, such Subordination Agent or its nominee shall be reflected as the owner of such Equipment Notes in the register of the issuer of such Equipment Notes. Section 12.04. Notices. (a) Unless otherwise specifically provided herein, all notices required under the terms and provisions of this Agreement shall be in English and in writing, and any such notice may be given by United States mail, courier service or telecopy, 69 63 and any such notice shall be effective when delivered or received or, if mailed, three days after deposit in the United States mail with proper postage for ordinary mail prepaid, (i) if to the Company: Atlas Air, Inc. 538 Commons Drive Golden, CO 80401 Attention: Chief Financial Officer Facsimile: (303) 526-5051 (ii) if to the Trustee: Wilmington Trust Company One Rodney Square 1100 N. Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Department Facsimile: (302) 651-8882 (b) The Company or the Trustee, by notice to the other, may designate additional or different addresses for subsequent notices or communications. (c) Any notice or communication to Certificateholders shall be mailed by first-class mail to the addresses for Certificateholders shown on the Register kept by the Registrar and to addresses filed with the Trustee for Certificate Owners. Failure so to mail a notice or communication or any defect in such notice or communication shall not affect its sufficiency with respect to other Certificateholders or Certificate Owners. (d) If a notice or communication is mailed in the manner provided above within the time prescribed, it is conclusively presumed to have been duly given, whether or not the addressee receives it. (e) If the Company mails a notice or communication to the Certificateholders, it shall mail a copy to the Trustee and to each Paying Agent for such series at the same time. (f) Notwithstanding the foregoing, all communications or notices to the Trustee shall be deemed to be given only when received by a Responsible Officer of the Trustee. 70 64 (g) The Trustee shall promptly furnish the Company with a copy of any demand, notice or written communication received by the Trustee hereunder from any Certificateholder, Owner Trustee or Loan Trustee. Section 12.05. Governing Law. THIS AGREEMENT HAS BEEN DELIVERED IN THE STATE OF DELAWARE AND, TOGETHER WITH THE CERTIFICATES, SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. Section 12.06. Severability of Provisions. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions, or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement or the Trust, or of the Certificates or the rights of the Certificateholders thereof. Section 12.07. Trust Indenture Act Controls. Upon the occurrence of any Registration Event, this Agreement shall become subject to the provisions of the Trust Indenture Act and shall, to the extent applicable, be governed by such provisions. From and after any Registration Event, if any provision of this Agreement limits, qualifies or conflicts with another provision which is required to be included in this Agreement by the Trust Indenture Act, the required provision shall control. Section 12.08. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. Section 12.09. Successors and Assigns. All covenants, agreements, representations and warranties in this Agreement by the Trustee and the Company shall bind and, to the extent permitted hereby, shall inure to the benefit of and be enforceable by their respective successors and assigns, whether so expressed or not. Section 12.10. Benefits of Agreement. Nothing in this Agreement or in the Certificates, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, and the Certificateholders, any benefit or any legal or equitable right, remedy or claim under this Agreement. Section 12.11. Legal Holidays. In any case where any Regular Distribution Date or Special Distribution Date relating to any Certificate shall not be a Business Day, then 71 65 (notwithstanding any other provision of this Agreement) payment need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on such Regular Distribution Date or Special Distribution Date, and no interest shall accrue during the intervening period. Section 12.12. Counterparts. For the purpose of facilitating the execution of this Agreement and for other purposes, this Agreement may be executed simultaneously in any number of counterparts, each of which counterparts shall be deemed to be an original, and all of which counterparts shall constitute but one and the same instrument. Section 12.13. Communication by Certificateholders with Other Certificateholders. Certificateholders may communicate with other Certificateholders with respect to their rights under this Agreement or the Certificates pursuant to Section 312(b) of the Trust Indenture Act. The Company, the Trustee and any and all other persons benefitted by this Agreement shall have the protection afforded by Section 312(c) of the Trust Indenture Act. Section 12.14. Intention of Parties. The parties hereto intend that each Trust be classified for U.S. federal income tax purposes as a grantor trust under Subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as amended, and not as a trust or association taxable as a corporation or as a partnership. The Trustee agrees to hold all assets of each Trust for investment purposes only. Each Certificateholder and Investor, by its acceptance of its Certificate or a beneficial interest therein, agrees to treat the Trust as a grantor trust for all U.S. federal, state and local income tax purposes. The powers granted and obligations undertaken pursuant to this Agreement shall be so construed so as to further such intent. 72 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed by their respective officers hereunto duly authorized as of the day and year first written above. ATLAS AIR, INC. By: /s/ RICHARD H. SHUYLER -------------------------------------- Name: Richard H. Shuyler Title: Chief Financial Officer, Sr. Vice Pres., Finance; and Corporate Treasurer WILMINGTON TRUST COMPANY, as Trustee By: /s/ JAMES P. LAWLER -------------------------------------- Name: James P. Lawler Title: Vice President 73 EXHIBIT A FORM OF CERTIFICATE REGISTERED No. ______________ [THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS CERTIFICATE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT; (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFICATE WAS HELD BY ATLAS AIR, INC., THE TRUSTEE OR ANY AFFILIATE OF ANY OF SUCH PERSONS RESELL OR OTHERWISE TRANSFER THIS CERTIFICATE EXCEPT (A) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (B) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING $100,000 OR MORE AGGREGATE PRINCIPAL AMOUNT OF SUCH CERTIFICATE THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS CERTIFICATE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES 74 A-2 ACT (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT; AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS CERTIFICATE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS CERTIFICATE WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFICATE WAS HELD BY ATLAS AIR, INC., THE TRUSTEE OR ANY AFFILIATE OF ANY OF SUCH PERSONS THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE PASS THROUGH TRUST AGREEMENT CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS CERTIFICATE IN VIOLATION OF THE FOREGOING RESTRICTIONS.]* [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. __________________________________ * Not to be included on the face of the Permanent Offshore Global Certificate. 75 A-3 TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE PASS THROUGH TRUST AGREEMENT REFERRED TO HEREIN.* [BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT EITHER (A) NO PLAN ASSETS HAVE BEEN USED TO PURCHASE THIS CERTIFICATE OR (B) THE PURCHASE AND HOLDING OF THIS CERTIFICATE ARE EXEMPT FROM THE PROHIBITED TRANSACTION RESTRICTIONS OF ERISA AND THE CODE PURSUANT TO ONE OR MORE PROHIBITED TRANSACTION STATUTORY OR ADMINISTRATIVE EXEMPTIONS.] __________________________________ * To be included on the face of each Global Certificate. 76 A-4 [GLOBAL CERTIFICATE]* ATLAS AIR 1998-1B PASS THROUGH TRUST 7.68% Atlas Air [Initial] [Exchange] Pass Through Certificate Series 1998-1B Final Distribution Date: January 2, 2014 evidencing a fractional undivided interest in a trust, the property of which includes certain equipment notes each secured by an Aircraft leased to Atlas Air, Inc. $____________ Fractional Undivided Interest representing .________% of the Trust per $1,000 face amount THIS CERTIFIES THAT ______________________, for value received, is the registered owner of a $__________ _ (________________ dollars) Fractional Undivided Interest in the Atlas Air 1998-1B Pass Through Trust (the "Trust") created pursuant to a Pass Through Trust Agreement, dated as of February 9, 1998 (the "Agreement"), between Wilmington Trust Company (the "Trustee") and Atlas Air, Inc., a corporation incorporated under Delaware law (the "Company"), a summary of certain of the pertinent provisions of which is set forth below. To the extent not otherwise defined herein, the capitalized terms used herein have the meanings assigned to them in the Agreement. This Certificate is one of the duly authorized Certificates designated as "7.68% Atlas Air [Initial] [Exchange] Pass Through Certificates Series 1998- 1B" (herein called the "Certificates"). This Certificate is issued under and is subject to the terms, provisions, and conditions of the Agreement. By virtue of its acceptance hereof the Certificateholder of this Certificate assents to and agrees to be bound by the provisions of the Agreement and the Intercreditor Agreement. The property of the Trust includes certain Equipment Notes and all rights of the Trust to receive payments under the Intercreditor Agreement and the Liquidity Facilities (the "Trust Property"). Each issue of the Equipment Notes is secured by, among other things, a security interest in the Aircraft leased to or owned by the Company. The Certificates represent fractional undivided interests in the Trust and the Trust Property, and have no rights, benefits or interest in respect of any assets or property other than the Trust Property. Subject to and in accordance with the terms of the Agreement and the Intercreditor Agreement, from and to the extent of funds then available to the Trustee, there __________________________________ * To be included on the face of each Global Certificate. 77 A-5 will be distributed on each January 2 and July 2 (a "Regular Distribution Date"), commencing on July 2, 1998, to the Person in whose name this Certificate is registered at the close of business on the 15th day preceding the Regular Distribution Date, an amount in respect of the Scheduled Payments on the Equipment Notes due on such Regular Distribution Date, the receipt of which has been confirmed by the Trustee, equal to the product of the percentage interest in the Trust evidenced by this Certificate and an amount equal to the sum of such Scheduled Payments. Subject to and in accordance with the terms of the Agreement and the Intercreditor Agreement, in the event that Special Payments on the Equipment Notes are received by the Trustee, from funds then available to the Trustee, there shall be distributed on the applicable Special Distribution Date, to the Person in whose name this Certificate is registered at the close of business on the 15th day preceding the Special Distribution Date, an amount in respect of such Special Payments on the Equipment Notes, the receipt of which has been confirmed by the Trustee, equal to the product of the percentage interest in the Trust evidenced by this Certificate and an amount equal to the sum of such Special Payments so received. If a Regular Distribution Date or Special Distribution Date is not a Business Day, distribution shall be made on the immediately following Business Day with the same force and effect as if made on such Regular Distribution Date or Special Distribution Date and no interest shall accrue during the intervening period. The Trustee shall mail notice of each Special Payment and the Special Distribution Date therefor to the Certificateholder of this Certificate. [The Holder of this Certificate is entitled to the benefits of the Registration Rights Agreement, dated as of February 9, 1998, among the Company, the Trustee and the Placement Agents named therein (the "Registration Rights Agreement"). In the event that neither the consummation of the Exchange Offer nor the declaration by the Commission of a Shelf Registration to be effective (a "Registration Event") occurs on or prior to the 180th day after the date of the issuance of the Certificates, the interest rate per annum borne by the Equipment Notes shall be increased by 0.50%, from and including August 9, 1998, to but excluding the date on which a Registration Event occurs. In the event that the Shelf Registration Statement ceases to be effective at any time during the period specified by the Registration Rights Agreement for more than 60 days, whether or not consecutive, during any 12-month period, the interest rate per annum borne by the Equipment Notes shall be increased by 0.50% from the 61st day of the applicable 12-month period such Shelf Registration Statement ceases to be effective until such time as the Shelf Registration Statement again becomes effective.]* Except as otherwise provided in the Agreement and notwithstanding the above, the final distribution on this Certificate will be made after notice mailed by the Trustee of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Trustee specified in such notice. __________________________________ * To be included only on each Initial Certificate. 78 A-6 THE AGREEMENT AND THIS CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed. Dated: [__________ __], 1998 ATLAS AIR 1998-1B PASS THROUGH TRUST By: WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Trustee Attest: By: --------------------------------------- Name: Title: - -------------------- Authorized Signature
79 A-7 [FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Certificates referred to in the within-mentioned Agreement. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Trustee By: ------------------------------ Authorized Officer 80 A-8 [REVERSE OF CERTIFICATE] The Certificates do not represent a direct obligation of, or an obligation guaranteed by, or an interest in, the Company or the Trustee or any of their affiliates. The Certificates are limited in right of payment, all as more specifically set forth on the face hereof and in the Agreement. All payments or distributions made to Certificateholders under the Agreement shall be made only from the Trust Property and only to the extent that the Trustee shall have sufficient income or proceeds from the Trust Property to make such payments in accordance with the terms of the Agreement. Each Certificateholder of this Certificate, by its acceptance hereof, agrees that it will look solely to the income and proceeds from the Trust Property to the extent available for distribution to such Certificateholder as provided in the Agreement. This Certificate does not purport to summarize the Agreement and reference is made to the Agreement for information with respect to the interests, rights, benefits, obligations, proceeds, and duties evidenced hereby. A copy of the Agreement may be examined during normal business hours at the principal office of the Trustee, and at such other places, if any, designated by the Trustee, by any Certificateholder upon request. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Certificateholders under the Agreement at any time by the Company and the Trustee with the consent of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust. Any such consent by the Certificateholder of this Certificate shall be conclusive and binding on such Certificateholder and upon all future Certificateholders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Certificateholders of any of the Certificates. As provided in the Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registrable in the Register upon surrender of this Certificate for registration of transfer at the offices or agencies maintained by the Trustee in its capacity as Registrar, or by any successor Registrar, in the Borough of Manhattan, the City of New York, duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Trustee and the Registrar duly executed by the Certificateholder hereof or such Certificateholder's attorney duly authorized in writing, and thereupon one or more new Certificates of authorized denominations evidencing the same aggregate Fractional Undivided Interest in the Trust will be issued to the designated transferee or transferees. 81 A-9 The Certificates are issuable only as registered Certificates without coupons in minimum denominations of [$100,000]* [$1,000]** Fractional Undivided Interest and integral multiples of $1,000 in excess thereof [except that one Certificate may be in a denomination of less than $100,000]*. As provided in the Agreement and subject to certain limitations therein set forth, the Certificates are exchangeable for new Certificates of authorized denominations evidencing the same aggregate Fractional Undivided Interest in the Trust, as requested by the Certificateholder surrendering the same. No service charge will be made for any such registration of transfer or exchange, but the Trustee shall require payment by the Holder of a sum sufficient to cover any tax or governmental charge payable in connection therewith. The Trustee, the Registrar, and any agent of the Trustee or the Registrar may treat the person in whose name this Certificate is registered as the owner hereof for all purposes, and neither the Trustee, the Registrar, nor any such agent shall be affected by any notice to the contrary. The obligations and responsibilities created by the Agreement and the Trust created thereby shall terminate upon the distribution to Certificateholders of all amounts required to be distributed to them pursuant to the Agreement and the disposition of all property held as part of the Trust Property. __________________________________ * To be included only on each Initial Certificate. ** To be included only on each Exchange Certificate. 82 A-10 FORM OF TRANSFER NOTICE FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s) and transfer(s) unto Insert Taxpayer Identification No. - ---------------------------------- - ---------------------------------- - ---------------------------------- please print or typewrite name and address including zip code of assignee - ---------------------------------- the within Certificate and all rights thereunder, hereby irrevocably constituting and appointing - ---------------------------------- attorney to transfer said Certificate on the books of the Trustee with full power of substitution in the premises. [THE FOLLOWING PROVISION TO BE INCLUDED ON ALL CERTIFICATES EXCEPT PERMANENT OFFSHORE GLOBAL AND OFFSHORE PHYSICAL CERTIFICATES] In connection with any transfer of this Certificate occurring prior to the date that is the earlier of the date of an effective Registration Statement or February 9, 2000, the undersigned confirms that without utilizing any general solicitation or general advertising that: [Check One] [ ] (a) this Certificate is being transferred in compliance with the exemption from registration under the Securities Act of 1933, as amended, provided by Rule 144A thereunder. or [ ] (b) this Certificate is being transferred other than in accordance with (a) above and documents are being furnished that comply with the conditions of transfer set forth in this Certificate and the Agreement. If neither of the foregoing boxes is checked, the Trustee or other Registrar shall not be obligated to register this Certificate in the name of any Person other than the Holder hereof 83 A-11 unless and until the conditions to any such transfer of registration set forth herein and in Section 3.06 of the Agreement shall have been satisfied. Date: [Name of Transferor] --------------------- -------------------------------------------------- NOTE: The signature must correspond with the name as written upon the face of the within-mentioned instrument in every particular, without alteration or any change whatsoever.
Signature Guarantee: __________________________________ TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Certificate for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, as amended, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: ------------------------- ----------------------------------------------------------- NOTE: To be executed by an executive officer.
84 EXHIBIT B FORM OF CERTIFICATE FOR UNLEGENDED CERTIFICATES [DATE] Wilmington Trust Company One Rodney Square 1100 N. Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Re: Atlas Air 1998-1B Pass Through Trust, Class B Pass Through Trust Certificates (the "Certificates") ---------------------------------------------- Dear Sirs: This letter relates to U.S. $__________ Fractional Undivided Interest of Certificates represented by a Certificate (the "Legended Certificate") which bears a legend outlining restrictions upon transfer of such Legended Certificate. Pursuant to Section 3.01 of the Pass Through Trust Agreement relating to the Certificates dated as of February 9, 1998 (the "Trust Agreement"), between Atlas Air, Inc. ("Atlas") and you, we hereby certify that we are (or we will hold such securities on behalf of) a person outside the United States to whom the Certificates could be transferred in accordance with Rule 904 of Regulation S promulgated under the U.S. Securities Act of 1933, as amended. Accordingly, you are hereby requested to exchange the legended certificate for an unlegended certificate representing an identical principal amount of Certificates, all in the manner provided for in the Trust Agreement. You and Atlas are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Certificateholder] By: --------------------------- Authorized Signature 85 EXHIBIT C FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S [DATE] Wilmington Trust Company One Rodney Square 1100 N. Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Re: Atlas Air 1998-1B Pass Through Trust (the "Trust"), 7.38% Atlas Air Pass Through Certificates Series 1998-1A (the "Certificates") ------------------------------------------------ Sirs: In connection with our proposed sale of $_______ Fractional Undivided Interest of the Certificates, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the Securities Act of 1933, as amended, and, accordingly, we represent that: (1) the offer of the Certificates was not made to a person in the United States; (2) either (a) at the time the buy order was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States or (b) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been pre- arranged with a buyer in the United States; (3) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; and 86 C-2 (4) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act. In addition, if the sale is made during a restricted period and the provisions of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are applicable thereto, we confirm that such sale has been made in accordance with the applicable provisions of Rule 903(c)(3) or Rule 904(c)(1), as the case may be. You and Atlas Air, Inc. are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Transferor] By: ----------------------------- Authorized Signature 87 EXHIBIT D FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS TO NON-QIB ACCREDITED INVESTORS ----------------------------------------- [DATE] Wilmington Trust Company One Rodney Square 1100 N. Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Re: Atlas Air 1998-1B Pass-Through Trust (the "Trust"), 7.68% Atlas Air Pass Through Certificates Series 1998-1B (the "Certificates") ------------------------------------------------ Dear Sirs: In connection with our proposed purchase of $_______________ aggregate principal amount of the Certificates, we confirm that: 1. We understand that any subsequent transfer of the Certificates is subject to certain restrictions and conditions set forth in the Pass Through Trust Agreement dated as of February 9, 1998 relating to the Certificates (the "Pass Through Trust Agreement") and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Certificates except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the "Securities Act"). 2. We understand that the Certificates have not been registered under the Securities Act, and that the Certificates may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell any Certificate, we will do so only (A) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (B) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes to you and Continental Airlines, Inc., a signed letter substantially in the form of this letter, (C) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (D) pursuant to the exemption from registration provided by Rule 144 under the Securities Act, or (E) pursuant to an effective registration statement under 88 D-2 the Securities Act, and we further agree to provide to any person purchasing any of the Certificates from us a notice advising such purchaser that resales of the Notes are restricted as stated herein. We further understand that the Certificates purchased by us will bear a legend to the foregoing effect. 3. We understand that, on any proposed resale of any Certificates, we will be required to furnish to you and Atlas Air, Inc. such certifications, legal opinions and other information as you and Atlas Air, Inc. may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Certificates purchased by us will bear a legend to the foregoing effect. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Certificates and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Certificates purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You and Atlas Air, Inc. are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Very truly yours, [Name of Transferor] By: ------------------------------------ Authorized Signature 89 EXHIBIT E FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT Atlas Air Pass Through Trust 1998-1B ASSIGNMENT AND ASSUMPTION AGREEMENT, dated ____________, 199_ (the "Assignment Agreement"), between Wilmington Trust Company, a Delaware banking corporation ("WTC"), not in its individual capacity except as expressly provided herein, but solely as trustee under the Pass Through Trust Agreement dated as of February 9, 1998 (as amended or modified from time to time, the "Agreement"), in respect of the Atlas Air Pass Through Trust 1998-1B-O (the "Assignor"), and Wilmington Trust Company, a Delaware banking corporation, not in its individual capacity except as expressly provided herein, but solely as trustee under the Pass Through Trust Agreement dated as of February 9, 1998 (as amended or modified from time to time, the "New Agreement"), in respect of the Atlas Air Pass Through Trust 1998-1B-S (the "Assignee"). W I T N E S S E T H: WHEREAS, the parties hereto desire to effect on the date hereof (the "Transfer Date") (a) the transfer by the Assignor to the Assignee of all of the right, title and interest of the Assignor in, under and with respect to, among other things, the Trust Property and each of the documents listed in Schedule I hereto (the "Scheduled Documents") and (b) the assumption by the Assignee of the obligations of the Assignor (i) under the Scheduled Documents and (ii) in respect of the Applicable Certificates issued under the Agreement; and WHEREAS, the Scheduled Documents permit such transfer upon satisfaction of certain conditions heretofore or concurrently herewith being complied with; NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements herein contained, the parties hereto do hereby agree as follows (capitalized terms used herein without definition having the meaning ascribed thereto in the Agreement): 1. Assignment. The Assignor does hereby sell, assign, convey, transfer and set over unto the Assignee as of the Transfer Date all of its present and future right, title and interest in, under and with respect to the Trust Property and the Scheduled Documents and each other contract, agreement, document or instrument relating to the Trust Property or the Scheduled Documents (such other contracts, agreements, documents or instruments, together with the Scheduled Documents, to be referred to as the "Assigned Documents"), and any proceeds therefrom, together with all documents and instruments evidencing any of such right, title and interest. 90 E-2 2. Assumption. The Assignee hereby assumes for the benefit of the Assignor and each of the parties listed in Schedule II hereto (collectively, the "Beneficiaries") all of the duties and obligations of the Assignor, whenever accrued, pursuant to the Assigned Documents and hereby confirms that it shall be deemed a party to each of the Assigned Documents to which the Assignor is a party and shall be bound by all the terms thereof (including the agreements and obligations of the Assignor set forth therein) as if therein named as the Assignor. Further, the Assignee hereby assumes for the benefit of the Assignor and the Beneficiaries all of the duties and obligations of the Assignor under the Outstanding Applicable Certificates and hereby confirms that the Applicable Certificates representing Fractional Undivided Interests under the Agreement shall be deemed for all purposes of the Agreement and the New Agreement to be certificates representing the same fractional undivided interests under the New Agreement equal to their respective beneficial interests in the trust created under the Agreement. 3. Effectiveness. This Assignment Agreement shall be effective upon the execution and delivery hereof by the parties hereto, and each Applicable Certificateholder, by its acceptance of its Applicable Certificate or a beneficial interest therein, agrees to be bound by the terms of this Assignment Agreement. 4. Payments. The Assignor hereby covenants and agrees to pay over to the Assignee, if and when received following the Transfer Date, any amounts (including any sums payable as interest in respect thereof) paid to or for the benefit of the Assignor that, under Section 1 hereof, belong to the Assignee. 5. Further Assurances. The Assignor shall, at any time and from time to time, upon the request of the Assignee, promptly and duly execute and deliver any and all such further instruments and documents and take such further action as the Assignee may reasonably request to obtain the full benefits of this Assignment Agreement and of the right and powers herein granted. The Assignor agrees to deliver any Applicable Certificates, and all Trust Property, if any, then in the physical possession of the Assignor, to the Assignee. 6. Representations and Warranties. (a) The Assignee represents and warrants to the Assignor and each of the Beneficiaries that: (i) it has all requisite power and authority and legal right to enter into and carry out the transactions contemplated hereby and to carry out and perform the obligations of the "Pass Through Trustee" under the Assigned Documents; (ii) on and as of the date hereof, the representations and warranties of the Assignee set forth in Section 7.15 of the Agreement and Section 7.15 of the New Agreement are true and correct. 91 E-3 (b) The Assignor represents and warrants to the Assignee that: (i) it is duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has the full trust power, authority and legal right under the laws of the State of Delaware and the United States pertaining to its trust and fiduciary powers to execute and deliver this Assignment Agreement; (ii) the execution and delivery by it of this Assignment Agreement and the performance by it of its obligations hereunder have been duly authorized by it and will not violate its articles of association or by-laws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it is bound; and (iii) this Assignment Agreement constitutes the legal, valid and binding obligations of it enforceable against it in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity, whether considered in a proceeding at law or in equity. 7. GOVERNING LAW. THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK INCLUDING MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. 8. Counterparts. This Assignment Agreement may be executed in any number of counterparts, all of which together shall constitute a single instrument. It shall not be necessary that any counterpart be signed by both parties so long as each party shall sign at least one counterpart. 9. Third Party Beneficiaries. The Assignee hereby agrees, for the benefit of the Beneficiaries, that its representations, warranties and covenants contained herein are also intended to be for the benefit of each Beneficiary, and each Beneficiary shall be deemed to be an express third party beneficiary with respect thereto, entitled to enforce directly and in its own name any rights or claims it may have against such party as such beneficiary. 92 E-4 IN WITNESS WHEREOF, the parties hereto, through their respective officers thereunto duly authorized, have duly executed this Assignment Agreement as of the day and year first above written. ASSIGNOR: WILMINGTON TRUST COMPANY, not in its individual capacity except as expressly provided herein, but solely as trustee under the Pass Through Trust Agreement in respect of the Atlas Air Pass Through Trust 1998-1B-O By: ---------------------------------- Title: ASSIGNEE: WILMINGTON TRUST COMPANY, not in its individual capacity except as expressly provided herein, but solely as trustee under the Pass Through Trust Agreement in respect of the Atlas Air Pass Through Trust 1998-1B-S By: ---------------------------------- Title: 93 Schedule I Schedule of Assigned Documents (1) Intercreditor Agreement dated as of February 9, 1998 among the Trustee, the Other Trustees, the Liquidity Provider, the liquidity providers, if any, relating to the Certificates issued under (and as defined in) each of the Other Agreements and the Subordination Agent. (2) Escrow and Paying Agent Agreement (Class B) dated as of February 9, 1998 among the Escrow Agent, the Placement Agents, the Trustee and the Paying Agent. (3) Note Purchase Agreement dated as of February 9, 1998 among the Company, the Trustee, the Other Trustees, the Depositary, the Escrow Agent, the Paying Agent and the Subordination Agent. (4) Deposit Agreement (Class B) dated as of February 9, 1998 between the Escrow Agent and the Depositary. (5) Each of the Operative Agreements (as defined in the Participation Agreement for each Aircraft) in effect as of the Transfer Date. 94 Schedule II Schedule of Beneficiaries Wilmington Trust Company, not in its individual capacity but solely as Subordination Agent Wilmington Trust Company, not in its individual capacity but solely as Paying Agent Morgan Stanley Capital Services, Inc., as Class B Liquidity Provider Atlas Air, Inc. Morgan Stanley & Co. Incorporated, as Placement Agent BT Alex. Brown Incorporated, as Placement Agent Donaldson, Lufkin & Jenrette Securities Corporation., as Placement Agent Goldman, Sachs & Co., as Placement Agent First Security Bank, National Association, as Escrow Agent Each of the other parties to the Assigned Documents EX-10.93 7 PASS THROUGH TRUST AGREEMENT 1998-1B-S 1 EXHIBIT 10.93 EXECUTION COPY - -------------------------------------------------------------------------------- PASS THROUGH TRUST AGREEMENT Dated as of February 9, 1998 between ATLAS AIR, INC. and WILMINGTON TRUST COMPANY as Trustee $115,481,000 Atlas Air Pass Through Trust 1998-1B-S 7.68% Atlas Air 1998-1B-S Initial Pass Through Certificates 7.68% Atlas Air 1998-1B-S Exchange Pass Through Certificates - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 1.02. Compliance Certificates and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 1.03. Form of Documents Delivered to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 1.04. Directions of Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE II ORIGINAL ISSUANCE OF CERTIFICATES: ACQUISITION OF TRUST PROPERTY Section 2.01. Delivery of Documents; Delivery Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 2.02. Withdrawal of Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 2.03. Acceptance by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 2.04. Limitation of Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 ARTICLE III THE CERTIFICATES Section 3.01. Title, Form, Denomination and Execution of Certificates . . . . . . . . . . . . . . . . . . . . . 20 Section 3.02. Restrictive Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 3.03. Authentication of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 3.04. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 3.05. Book-Entry Provisions for U.S. Global Certificate and Offshore Global Certificates . . . . . . . . 25 Section 3.06. Special Transfer Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Section 3.07. Mutilated, Destroyed, Lost or Stolen Certificates . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 3.08. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 3.09. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 3.10. Temporary Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 3.11. Limitation of Liability for Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
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Page ---- ARTICLE IV DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS Section 4.01. Certificate Account and Special Payments Account . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 4.02. Distributions from Certificate Account and Special Payments Account . . . . . . . . . . . . . . . 32 Section 4.03. Statements to Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Section 4.04. Investment of Special Payment Moneys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 ARTICLE V THE COMPANY Section 5.01. Maintenance of Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Section 5.02. Consolidation, Merger, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 ARTICLE VI DEFAULT Section 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 6.02. Incidents of Sale of Equipment Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Section 6.03. Judicial Proceedings Instituted by Trustee; Trustee May Bring Suit . . . . . . . . . . . . . . . . 40 Section 6.04. Control by Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Section 6.05. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Section 6.06. Right of Certificateholders to Receive Payments Not to Be Impaired . . . . . . . . . . . . . . . . 42 Section 6.07. Certificateholders May Not Bring Suit Except Under Certain Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Section 6.08. Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Section 6.09. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 ARTICLE VII THE TRUSTEE Section 7.01. Certain Duties and Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Section 7.02. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Section 7.03. Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
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Page ---- Section 7.04. Not Responsible for Recitals or Issuance of Certificates . . . . . . . . . . . . . . . . . . . . . 45 Section 7.05. May Hold Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 7.06. Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 7.07. Compensation and Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 7.08. Corporate Trustee Required; Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Section 7.09. Resignation and Removal; Appointment of Successor . . . . . . . . . . . . . . . . . . . . . . . . 47 Section 7.10. Acceptance of Appointment by Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Section 7.11. Merger, Conversion, Consolidation or Succession to Business . . . . . . . . . . . . . . . . . . . 49 Section 7.12. Maintenance of Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Section 7.13. Money for Certificate Payments to Be Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . 51 Section 7.14. Registration of Equipment Notes in Trustee's Name . . . . . . . . . . . . . . . . . . . . . . . . 51 Section 7.15. Representations and Warranties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Section 7.16. Withholding Taxes; Information Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Section 7.17. Trustee's Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Section 7.18. Preferential Collection of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 ARTICLE VIII CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE Section 8.01. The Company to Furnish Trustee with Names and Addresses of Certificateholders . . . . . . . . . . 54 Section 8.02. Preservation of Information; Communications to Certificateholders . . . . . . . . . . . . . . . . 54 Section 8.03. Reports by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Section 8.04. Reports by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 ARTICLE IX SUPPLEMENTAL AGREEMENTS Section 9.01. Supplemental Agreements Without Consent of Certificateholders . . . . . . . . . . . . . . . . . . 55 Section 9.02. Supplemental Agreements with Consent of Certificateholders . . . . . . . . . . . . . . . . . . . . 57 Section 9.03. Documents Affecting Immunity or Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 9.04. Execution of Supplemental Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 9.05. Effect of Supplemental Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 9.06. Conformity with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Section 9.07. Reference in Certificates to Supplemental Agreements . . . . . . . . . . . . . . . . . . . . . . . 59
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Page ---- ARTICLE X AMENDMENTS TO INDENTURE AND NOTE DOCUMENTS Section 10.01. Amendments and Supplements to Indenture and Other Note Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 ARTICLE XI TERMINATION OF TRUSTS Section 11.01. Termination of the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 ARTICLE XII MISCELLANEOUS PROVISIONS Section 12.01. Limitation on Rights of Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Section 12.02. Liabilities of Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Section 12.03. Registration of Equipment Notes in Name of Subordination Agent . . . . . . . . . . . . . . . . . 63 Section 12.04. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Section 12.05. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Section 12.06. Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Section 12.07. Trust Indenture Act Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.08. Effect of Headings and Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.09. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.10. Benefits of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.11. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.12. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.13. Communication by Certificateholders with Other Certificateholders . . . . . . . . . . . . . . . . 65 Section 12.14. Intention of Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
iv 6 Reconciliation and tie between Atlas Air Pass Through Trust Agreement, dated as of February 9, 1998 and the Trust Indenture Act of 1939. This reconciliation does not constitute part of the Pass Through Trust Agreement.
Trust Indenture Act Pass Through Trust of 1939 Section Agreement Section - ------------------------------------------- ------------------------------------------------ 310(a)(1) 7.07 (a)(2) 7.07 312(a) 3.05; 8.01; 8.02 313(a) 7.07 314(a) 8.04(a) - (c) (a)(4) 8.04(d) (c)(1) 1.02 (c)(2) 1.02 (d)(1) 7.13; 11.01 (d)(2) 7.13; 11.01 (d)(3) 2.01 (e) 1.02 315(b) 7.02 316(a)(last sentence) 1.01(c) (a)(1)(A) 6.04 (a)(1)(B) 6.05 (b) 6.06 (c) 1.04(d) 317(a)(1) 6.03 (b) 7.13 318(a) 12.05
v 7 PASS THROUGH TRUST AGREEMENT This PASS THROUGH TRUST AGREEMENT, dated as of February 9, 1998 (as the same may be amended, supplemented or modified from time to time, this "Agreement"), between ATLAS AIR, INC., a Delaware corporation (the "Company"), and WILMINGTON TRUST COMPANY, a Delaware trust company, as Trustee, is made with respect to the formation of Atlas Air Pass Through Trust 1998-1B-S and the deemed issuance of 7.68% Atlas Air 1998-1B-S Initial Pass Through Certificates representing fractional undivided interests in the Trust. W I T N E S S E T H: WHEREAS, the Company has obtained commitments from Boeing (such term and certain other capitalized terms used herein are defined below) for the delivery of certain Aircraft; WHEREAS, the Company as of the Transfer Date (as defined below) the Company will have financed the acquisition of all or a portion of such Aircraft either (i) through separate leveraged lease transactions, in which case the Company leases such Aircraft (collectively, the "Leased Aircraft") or (ii) through separate secured loan transactions, in which case the Company owns such Aircraft (collectively, the "Owned Aircraft"); WHEREAS, as of the Transfer Date in the case of each Leased Aircraft, each Owner Trustee, acting on behalf of the corresponding Owner Participant, will have issued pursuant to an Indenture, on a non-recourse basis, Equipment Notes in order to finance a portion of its purchase price of such Leased Aircraft; WHEREAS, as of the Transfer Date in the case of each Owned Aircraft, the Company will have issued pursuant to an Indenture, on a recourse basis, Equipment Notes to finance a portion of the purchase price of such Owned Aircraft; WHEREAS, as of the Transfer Date, the Related Trustee will assign, transfer and deliver all of such trustee's right, title and interest to the trust property held by the Related Trustee to the Trustee pursuant to the Assignment and Assumption Agreement (as defined below); WHEREAS, the Trustee, effective only, but automatically, upon execution and delivery of the Assignment and Assumption Agreement, will be deemed to have declared the creation of the Atlas Air Pass Through Trust 1998-1B-S (the "Trust") for the benefit of the Certificateholders, and each Holder of Certificates outstanding as of the Transfer Date, as a grantor of the Trust, by its respective acceptance of such Certificates, will join in the creation of this Trust with the Trustee; 8 2 WHEREAS, all Certificates deemed issued by the Trust will evidence fractional undivided interests in the Trust and will convey no rights, benefits or interests in respect of any property other than the Trust Property except for those Certificates to which an Escrow Receipt has been affixed; WHEREAS, to facilitate the sale of Equipment Notes to, and the purchase of Equipment Notes by, the Trustee on behalf of the Trust, the Company has duly authorized the execution and delivery of this Agreement as the "issuer", as such term is defined in and solely for purposes of the Securities Act, of the Certificates to be issued pursuant hereto and as the "obligor", as such term is defined in and solely for purposes of the Trust Indenture Act of 1939, as amended, with respect to all such Certificates and is undertaking to perform certain administrative and ministerial duties hereunder and is also undertaking to pay the ongoing fees and expenses of the Trustee; WHEREAS, upon the execution and delivery of the Assignment and Assumption Agreement, all of the conditions and requirements necessary to make this Agreement, when duly executed and delivered, a valid, binding and legal instrument in accordance with its terms and for the purposes herein expressed, have been done, performed and fulfilled, and the execution and delivery of this Agreement in the form and with the terms hereof have been in all respects duly authorized; WHEREAS, upon issuance of the Exchange Certificates, if any, or the effectiveness of the Shelf Registration Statement, this Agreement as amended or supplemented from time to time, will be subject to the provisions of the Trust Indenture Act of 1939, as amended, and shall, to the extent applicable, be governed by such provisions; NOW, THEREFORE, in consideration of the mutual agreements herein contained, and of other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms used herein that are defined in this Article I have the meanings assigned to them in this Article I, and include the plural as well as the singular; 9 3 (b) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, or by the rules promulgated under the Trust Indenture Act, have the meanings assigned to them therein; (c) all references in this Agreement to designated "Articles", "Sections", "Subsections" and other subdivisions are to the designated Articles, Sections, Subsections and other subdivisions of this Agreement; (d) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section, Subsection or other subdivision; and (e) unless the context otherwise requires, whenever the words "including" "include" or "includes" are used herein, it shall be deemed to be followed by the phrase "without limitation". "Act" has the meaning, with respect to any Certificateholder, specified in Section 1.04(a). "Affiliate" means, with respect to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person. For the purposes of this definition, "control", when used with respect to any specified Person, means the power, directly or indirectly, to direct the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agent Members" has the meaning specified in Section 3.05(a). "Agreement" has the meaning specified in the recitals hereto. "Aircraft" means each of the Aircraft or Substitute Aircraft in respect of which a Participation Agreement is entered into in accordance with the Note Purchase Agreement. "Assignment and Assumption Agreement" means the assignment and assumption agreement substantially in the form of Exhibit E to the Related Pass Through Trust Agreement executed and delivered in accordance with Section 11.01. "Authorized Agent" means, with respect to the Certificates, any Paying Agent or Registrar for the Certificates. 10 4 "Avoidable Tax" has the meaning set forth in Section 7.09(e). "Boeing" means The Boeing Company. "Business Day" means, with respect to the Certificates, any day other than a Saturday, a Sunday or a day on which commercial banks are required or authorized to close in Denver, Colorado, New York, New York, Chicago, Illinois or, so long as any Certificate is outstanding, the city and state in which the Trustee or any related Loan Trustee maintains its Corporate Trust Office or receives and disburses funds. "Certificate" means any one of the Initial Certificates or Exchange Certificates and any such Certificates issued in exchange therefor or replacement thereof pursuant to this Agreement. "Certificate Account" means, with respect to the Certificates, the account or accounts created and maintained for such series pursuant to Section 4.01(a). "Certificateholder" or "Holder" means the Person in whose name a Certificate is registered in the Register for Certificates. "Clearing Agency" means an organization registered as a "clearing agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as amended. "Clearing Agency Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects, directly or indirectly, book-entry transfers and pledges of securities deposited with the Clearing Agency. "Company" means Atlas Air, Inc., a Delaware corporation, or its successor in interest pursuant to Section 5.02, or (only in the context of provisions hereof, if any, when such reference is required for purposes of compliance with the Trust Indenture Act) any other "obligor" (within the meaning of the Trust Indenture Act) with respect to the Certificates. "Controlling Party" means the Person entitled to act as such pursuant to the terms of the Intercreditor Agreement. "Corporate Trust Office" means, with respect to the Trustee or any Loan Trustee, the office of such trustee in the city at which at any particular time its corporate trust business shall be principally administered. 11 5 "Delivery Period Termination Date" has the meaning specified in the Related Pass Through Trust Agreement. "Direction" has the meaning specified in Section 1.04(a). "Equipment Notes" means all of the equipment notes issued under the Indentures. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor federal statute. "Escrow Account" has the meaning specified in Section 2.02(b). "Escrow Agent" means, initially, First Security, National Association, and any replacement or successor therefor appointed in accordance with the Escrow Agreement. "Escrow Agreement" means the Escrow and Paying Agent Agreement dated as of February 9, 1998 relating to the Certificates, among the Escrow Agent, the Escrow Paying Agent, the Related Trustee (and after the Transfer Date, the Trustee) and Placement Agents, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Escrow Paying Agent" means the Person acting as paying agent under the Escrow Agreement. "Escrow Receipt" means the receipt substantially in the form annexed to the Escrow Agreement representing a fractional undivided interest in the funds held in escrow thereunder. "Escrowed Funds" has the meaning specified in Section 2.02(b). "Event of Default" means an Indenture Event of Default under any Indenture pursuant to which Equipment Notes held by such Trust were issued. "Exchange Certificates" means the certificates substantially in the form of Exhibit A to the Related Pass Through Trust Agreement issued in exchange for the Certificates pursuant to the Registration Rights Agreement and authenticated hereunder. "Fractional Undivided Interest" means the fractional undivided interest in a Trust that is evidenced by a Certificate. 12 6 "Global Certificates" has the meaning specified in Section 3.01(d). "Indenture" means each of the separate trust indentures and mortgages relating to the Aircraft, each as specified or described in a Delivery Notice delivered pursuant to the Note Purchase Agreement or the related Participation Agreement, in each case as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Indenture Event of Default" means, with respect to any Indenture, any Indenture Event of Default (as such term is defined in such Indenture). "Initial Regular Distribution Date" means, with respect to the Certificates, the first Regular Distribution Date on which a Scheduled Payment is to be made. "Institutional Accredited Investor" means an institutional investor that is an "accredited investor" within the meaning set forth in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act. "Intercreditor Agreement" means the Intercreditor Agreement dated as of February 9, 1998 among the Related Trustee (and after the Transfer Date, the Trustee), the Related Other Trustees (and after the Transfer Date, the Other Trustees), the Liquidity Providers, the liquidity providers relating to the Certificates issued under (and as defined in) each of the Related Other Pass Through Trust Agreements, and Wilmington Trust Company, as Subordination Agent and as trustee thereunder, as amended, supplemented or otherwise modified from time to time in accordance with its terms. "Issuance Date" means, with respect to the Certificates, the date of the issuance of such Certificates. "Investors" means the Placement Agents together with all subsequent beneficial owners of the Certificates. "Lease" means, with respect to each Leased Aircraft, any lease between an Owner Trustee, as the lessor, and the Company, as the lessee, referred to in the related Indenture, as such lease may be amended, supplemented or otherwise modified in accordance with its terms; and "Leases" means all such Leases. "Leased Aircraft" has the meaning specified in the recitals hereto. 13 7 "Leased Aircraft Participation Agreement" means any participation agreement substantially in the form of Exhibit A-1 to the Note Purchase Agreement, as the same may be amended, supplemented or otherwise modified in accordance with its terms. "Letter of Representations" means, with respect to the Certificates, an agreement among the Company, the Related Trustee (and after the Transfer Date, the Trustee) and the initial Clearing Agency. "Liquidity Facility" means, with respect to the Certificates, any revolving credit agreement, letter of credit or similar facility relating to the Certificates between a bank or other financial institution and a Subordination Agent, as amended, replaced, supplemented or otherwise modified from time to time in accordance with its terms and the terms of any Intercreditor Agreement. "Liquidity Provider" means, with respect to the Certificates, a bank or other financial institution that agrees to provide a Liquidity Facility for the benefit of the holders of Certificates. "Loan Trustee" means, with respect to any Equipment Note or the Indenture applicable thereto, the bank or trust company designated as loan or indenture trustee under such Indenture, and any successor to such Loan Trustee as such trustee; and "Loan Trustees" means all of the Loan Trustees under the Indentures. "Non-U.S. Person" means a Person that is not a "U.S. person", as defined in Regulation S. "Note Documents" means, with respect to the Certificates, the Equipment Notes with respect to such Certificates and, with respect to such Equipment Notes, the related Indenture, Note Purchase Agreement and, if the related Aircraft is leased to the Company, the related Lease and the related Owner Trustee's Purchase Agreement. "Note Purchase Agreement" means, with respect to the Certificates, any note purchase, refunding, participation or similar agreement; and "Note Purchase Agreements" means all such agreements. "Offering Memorandum" means the Offering Memorandum dated January 27, 1998 relating to the offering of the Certificates and the certificates offered under the Related Other Pass Through Trust Agreements. "Officer's Certificate" means a certificate signed, (a) in the case of the Company, by the Chairman or Vice Chairman of the Board of Directors, the 14 8 President, any Vice President or the Treasurer of the Company, signing alone, or (b) in the case of the Trustee or an Owner Trustee or a Loan Trustee, a Responsible Officer of the Trustee or such Owner Trustee or such Loan Trustee, as the case may be. "Offshore Certificates Exchange Date" has the meaning specified in Section 3.01(d). "Offshore Global Certificates" has the meaning specified in Section 3.01(d). "Offshore Physical Certificates" has the meaning specified in Section 3.01(e). "Opinion of Counsel" means a written opinion of legal counsel who (a) in the case of counsel for the Company may be (i) a senior attorney of the Company one of whose principal duties is furnishing advice as to legal matters, (ii) Cahill Gordon & Reindel or (iii) such other counsel designated by the Company and reasonably acceptable to the Trustee and (b) in the case of any Owner Trustee or any Loan Trustee, may be such counsel as may be designated by any of them whether or not such counsel is an employee of any of them, and who shall be reasonably acceptable to the Trustee. "Other Pass Through Trust Agreements" means each of the two other Atlas Air 1998-1 Pass Through Trust Agreements relating to Atlas Air Pass Through Trust, Series 1998-1A-S and Atlas Air Pass Through Trust, Series 1998-1C-S, dated the date hereof. "Other Trustees" means the trustees under the Other Pass Through Trust Agreements, and any successor or other trustee appointed as provided therein. "Other Trusts" means the Atlas Air Pass Through Trust 1998-1A-S and the Atlas Air Pass Through Trust 1998-1C-S, each created on the date hereof. "Outstanding" when used with respect to Certificates, means, as of the date of determination, all Certificates theretofore authenticated and delivered under this Agreement, except: (a) Certificates theretofore cancelled by the Registrar or delivered to the Trustee or the Registrar for cancellation; (b) All of the Certificates if money in the full amount required to make the final distribution with respect to such series pursuant to Section 11.01 hereof has been theretofore deposited with the Trustee in trust 15 9 for the Holders of the Certificates as provided in Section 4.01 pending distribution of such money to such Certificateholders pursuant to payment of such final distribution payment; and (c) Certificates in exchange for or in lieu of which other Certificates have been authenticated and delivered pursuant to this Agreement. "Owned Aircraft" has the meaning specified in the recitals hereto. "Owned Aircraft Participation Agreement" means any participation agreement substantially in the form of Exhibit C-1 to the Note Purchase Agreement, as the same may be amended, supplemented or otherwise modified in accordance with its terms. "Owner Trustee's Purchase Agreement" has the meaning, with respect to the Certificates if the related Aircraft is leased to the Company, specified therefor in the related Lease. "Participation Agreement" means, collectively, the Leased Aircraft Participation Agreement and the Owned Aircraft Participation Agreement. "Paying Agent" means, with respect to the Certificates, the paying agent maintained and appointed for the Certificates pursuant to Section 7.12. "Permanent Offshore Global Certificates" has the meaning specified in Section 3.01(d). "Permitted Investments" means obligations of the United States of America or agencies or instrumentalities thereof for the payment of which the full faith and credit of the United States of America is pledged, maturing in not more than 60 days after the date of acquisition thereof or such lesser time as is required for the distribution of any Special Payments on a Special Distribution Date. "Person" means any person, including any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, trustee, unincorporated organization, or government or any agency or political subdivision thereof. "Physical Certificates" has the meaning specified in Section 3.01. "Placement Agents" means Morgan Stanley & Co. Incorporated, BT Alex. Brown Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co. 16 10 "Placement Agreement" means the Placement Agreement dated January 27, 1998 among the Placement Agents and the Company, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Pool Balance" means, as of any date, (i) the original aggregate face amount of the Certificates as defined in the Related Pass Through Trust Agreement less (ii) the aggregate amount of all payments made in respect of the Certificates other than payments made in respect of interest or premium thereon or reimbursement of any costs or expenses incurred in connection therewith. The Pool Balance as of any Distribution Date shall be computed after giving effect to the payment of principal, if any, on the Equipment Notes or other Trust Property held in the Trust and the distribution thereof to be made on such Distribution Date. "Pool Factor" means, as of any date, the quotient (rounded to the seventh decimal place) computed by dividing (i) the Pool Balance of such series as at such date by (ii) the original aggregate face amount of the Certificates as defined in the Related Pass Through Trust Agreement. The Pool Factor as of any Distribution Date shall be computed after giving effect to the payment of principal, if any, on the Equipment Notes or other Trust Property held in the Trust and the distribution thereof to be made on such Distribution Date. "Potential Purchaser" has the meaning, with respect to any Certificateholder, specified in Section 6.01(b). "Private Placement Legend" has the meaning specified in Section 3.02(a). "PTC Event of Default" means, with respect to the Certificates, any failure to pay within ten Business Days of the due date thereof: (i) the outstanding Pool Balance of such series of Certificates on the date specified in any Trust Supplement for such payment or (ii) interest due on the Certificates on any Distribution Date (unless the related Subordination Agent shall have made an Interest Drawing or Drawings (as defined in the related Intercreditor Agreement), or a withdrawal or withdrawals pursuant to a cash collateral account under such Intercreditor Agreement, with respect thereto in an aggregate amount sufficient to pay such interest and shall have distributed such amount to the Trustee). "Purchasing Certificateholder" has the meaning, with respect to any Certificateholder, specified in Section 6.01(b). "QIB" means a qualified institutional buyer as defined in Rule 144A. 17 11 "Record Date" means, with respect to any Trust or the related series of Certificates, (i) for Scheduled Payments to be distributed on any Regular Distribution Date, other than the final distribution with respect to such series, the 15th day (whether or not a Business Day) preceding such Regular Distribution Date, and (ii) for Special Payments to be distributed on any Special Distribution Date, other than the final distribution with respect to such series, the 15th day (whether or not a Business Day) preceding such Special Distribution Date. "Register" and "Registrar" means, each with respect to the Certificates, the register maintained and the registrar appointed pursuant to Sections 3.04 and 7.12. "Registration Event" has the meaning set forth in the Placement Agreement. "Registration Rights Agreement" means the Registration Rights Agreement dated February 9, 1998, among the Placement Agents, the Related Trustee (and after the Transfer Date, the Trustee), the Related Other Trustees (and after the Transfer Date, the Other Trustees) and the Company, as amended, supplemented or otherwise modified from time to time in accordance with its terms. "Registration Statement" means the Registration Statement defined in the Registration Rights Agreement. "Regular Distribution Date" means, with respect to distributions of Scheduled Payments in respect of any series of Certificates, each date designated as such in this Agreement, until payment of all the Scheduled Payments to be made under the Equipment Notes held in the Trust have been made. "Regulation S" means Regulation S under the Securities Act or any successor regulation thereto. "Related Pass Through Trust Agreement" means the Atlas Air 1998-1B-O Pass Through Trust Agreement relating to the Atlas Air Pass Through Trust 1998-1B-O and entered into by the Company and the Related Trustee, as amended, supplemented or otherwise modified from time to time in accordance with its terms. "Related Trust" means the Atlas Pass Through Trust 1998-1B-O, formed under the Related Pass Through Trust Agreement. "Related Trustee" means the trustee under the Related Pass Through Trust Agreement. 18 12 "Request" means a request by the Company setting forth the subject matter of the request accompanied by an Officer's Certificate and an Opinion of Counsel as provided in Section 1.02 of this Agreement. "Responsible Officer" means, with respect to any Trustee, any Loan Trustee and any Owner Trustee, any officer in the Corporate Trust Department of the Trustee, Loan Trustee or Owner Trustee or any other officer customarily performing functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of his knowledge of and familiarity with a particular subject. "Responsible Party" means, with respect to the Certificates, the person designated as such in the related Trust Supplement. "Rule 144A" means Rule 144A under the Securities Act and any successor rule thereto. "Scheduled Payment" means, with respect to any Equipment Note, (i) any payment of principal or interest on such Equipment Note (other than any such payment which is not in fact received by the Trustee or any Subordination Agent within five days of the date on which such payment is scheduled to be made) or (ii) any payment of interest on the Certificates with funds drawn under the Liquidity Facility for such series, which payment represents the installment of principal on such Equipment Note at the stated maturity of such installment, the payment of regularly scheduled interest accrued on the unpaid principal amount of such Equipment Note, or both; provided, however, that any payment of principal, premium, if any, or interest resulting from the redemption or purchase of any Equipment Note shall not constitute a Scheduled Payment. "SEC" means the Securities and Exchange Commission, as from time to time constituted or created under the Securities Exchange Act of 1934, as amended, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties on such date. "Selling Certificateholder" has the meaning, with respect to any Certificateholder, specified in Section 6.01(b). "Shelf Registration Statement" has the meaning set forth in the Registration Rights Agreement. 19 13 "Special Distribution Date" means, with respect to the Certificates, each date on which a Special Payment is to be distributed as specified in this Agreement. "Special Payment" means (i) any payment (other than a Scheduled Payment) in respect of, or any proceeds of, any Equipment Note or Trust Indenture Estate (as defined in each Indenture) or Special Redemption Premium, (ii) the amounts required to be distributed pursuant to the last paragraph of Section 2.02(b) or (iii) the amounts required to be distributed pursuant to the penultimate paragraph of Section 2.02(b). "Special Payments Account" means, with respect to the Certificates, the account or accounts created and maintained for such series pursuant to Section 4.01(b) and the related Trust Supplement. "Special Redemption Premium" means the premium payable by the Company in respect of the Final Withdrawal pursuant to the Note Purchase Agreement. "Specified Investments" means, with respect to any Trust, (i) obligations of, or guaranteed by, the United States Government or agencies thereof, (ii) open market commercial paper of any corporation incorporated under the laws of the United States of America or any state thereof rated at least P-2 or its equivalent by Moody's Investors Service, Inc. or at least A-2 or its equivalent by Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., (iii) certificates of deposit issued by commercial banks organized under the laws of the United States or of any political subdivision thereof having a combined capital and surplus in excess of $100,000,000 which banks or their holding companies have a rating of A or its equivalent by Moody's Investors Service, Inc. or Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc.; provided, however, that the aggregate amount at any one time so invested in certificates of deposit issued by any one bank shall not exceed 5% of such bank's capital and surplus, (iv) U.S. dollar- denominated offshore certificates of deposit issued by, or offshore time deposits with, any commercial bank described in clause (iii) above or any subsidiary thereof and (v) repurchase agreements with any financial institution having combined capital and surplus of at least $100,000,000 with any of the obligations described in clauses (i) through (iv) above as collateral; provided further that if all of the above investments are unavailable, the entire amounts to be invested may be used to purchase federal funds from an entity described in clause (iii) above. "Subordination Agent" has the meaning specified therefor in the Intercreditor Agreement. "Substitute Aircraft" has the meaning specified in the Note Purchase Agreement. 20 14 "Temporary Offshore Global Certificates" has the meaning specified in Section 3.01(d). "Transfer Date" has the meaning specified in Section 11.01. "Triggering Event" has the meaning specified therefor in the Intercreditor Agreement. "Trust" means the trust under this Agreement. "Trustee" means Wilmington Trust Company, or its successor in interest, and any successor or other trustee appointed as provided herein. "Trustee's Liens" has the meaning specified in Section 7.17. "Trust Indenture Act", except as otherwise provided in Section 9.06, means, with respect to any particular Trust, the United States Trust Indenture Act of 1939, as in force at the date as of which the related Pass Through Trust Agreement was executed. "Trust Property" means (i) subject to the Intercreditor Agreement, the Equipment Notes held as the property of the Trust, all monies at any time paid thereon and all monies due and to become due thereunder, (ii) funds from time to time deposited in the Escrow Account, the Certificate Account and the Special Payments Account and, subject to the Intercreditor Agreement, any proceeds from the sale by the Trustee pursuant to Article VI hereof of any such Equipment Note, (iii) all rights of the Trust and the Trustee, on behalf of the Trust, under the Intercreditor Agreement, the Escrow Agreement, the Note Purchase Agreement and the Liquidity Facilities, including, without limitation, all rights to receive certain payments thereunder, and all monies paid to the Trustee on behalf of the Trust pursuant to the Intercreditor Agreement or the Liquidity Facilities, provided that rights with respect to the Deposits or under the Escrow Agreement, will not constitute Trust Property. "U.S. Global Certificate" has the meaning specified in Section 3.01(c). "U.S. Physical Certificates" has the meaning specified in Section 3.01(e). "7.68% 1998-1B Initial Pass Through Certificates" has the meaning specified in Section 3.01(a). "7.68% 1998-1B Exchange Pass Through Certificates" has the meaning specified in Section 3.01(a). 21 15 Section 1.02. Compliance Certificates and Opinions. Upon any application or request by the Company, any Owner Trustee or any Loan Trustee to the Trustee to take any action under any provision of this Agreement, the Company, such Owner Trustee or such Loan Trustee, as the case may be, shall furnish to the Trustee (i) an Officer's Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Agreement relating to the proposed action have been complied with and (ii) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Agreement relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Agreement (other than a certificate provided pursuant to Section 8.04(d)) shall include: (a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions in this Agreement relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. Section 1.03. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters and any such Person may certify or give an opinion as to such matters in one or several documents. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Agreement, they may, but need not, be consolidated and form one instrument. 22 16 Section 1.04. Directions of Certificateholders. (a) Any direction, consent, request, demand, authorization, notice, waiver or other action provided by this Agreement in respect of the Certificates to be given or taken by Certificateholders (a "Direction") may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Certificateholders in person or by an agent or proxy duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, when it is hereby expressly required pursuant to this Agreement, to the Company or any Loan Trustee. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Certificateholders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent or proxy shall be sufficient for any purpose of this Trust Agreement and conclusive in favor of the Trustee, the Company and the related Loan Trustee, if made in the manner provided in this Section 1.04. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the certificate of any notary public or other officer of any jurisdiction authorized to take acknowledgments of deeds or administer oaths that the Person executing such instrument acknowledged to him the execution thereof, or by an affidavit of a witness to such execution sworn to before any such notary or such other officer, and where such execution is by an officer of a corporation or association or a member of a partnership, on behalf of such corporation, association or partnership, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other reasonable manner which the Trustee deems sufficient. (c) In determining whether the Certificateholders of the requisite Fractional Undivided Interests of Certificates Outstanding have given any Direction under this Agreement, Certificates owned by the Company or any Affiliate thereof shall be disregarded and deemed not to be Outstanding for purposes of any such determination. In determining whether the Trustee shall be protected in relying upon any such Direction, only Certificates which the Trustee knows to be so owned shall be so disregarded. Notwithstanding the foregoing, (i) if any such Person owns 100% of the Certificates Outstanding, such Certificates shall not be so disregarded, and (ii) if any amount of Certificates so owned by any such Person have been pledged in good faith, such Certificates shall not be disregarded if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Certificates and that the pledgee is not the Company or any Affiliate thereof. (d) The Company may, at its option, by delivery of an Officer's Certificate to the Trustee, set a record date to determine the Certificateholders in respect of the Certificates, entitled to give any Direction. Notwithstanding Section 316(c) of the Trust 23 17 Indenture Act, such record date shall be the record date specified in such Officer's Certificate, which shall be a date not more than 30 days prior to the first solicitation of Certificateholders of the applicable series in connection therewith. If such a record date is fixed, such Direction may be given before or after such record date, but only the Certificateholders of record of the applicable series at the close of business on such record date shall be deemed to be Certificateholders for the purposes of determining whether Certificateholders of the requisite proportion of Outstanding Certificates have authorized or agreed or consented to such Direction, and for that purpose the Outstanding Certificates shall be computed as of such record date; provided, however, that no such Direction by the Certificateholders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Agreement not later than one year after such record date. (e) Any Direction by the Holder of any Certificate shall bind the Holder of every Certificate issued upon the transfer thereof or in exchange therefor or in lieu thereof, whether or not notation of such Direction is made upon such Certificate. (f) Except as otherwise provided in Section 1.04(c), Certificates owned by or pledged to any Person shall have an equal and proportionate benefit under the provisions of this Agreement, without preference, priority or distinction as among all of the Certificates. ARTICLE II ACQUISITION OF THE TRUST PROPERTY Section 2.01. Acquisition of Trust Property. The Trustee is hereby irrevocably authorized and directed to execute and deliver the Assignment and Assumption Agreement on the date specified in Section 11.01 of the Related Pass Through Trust Agreement, subject only to the satisfaction of the conditions set forth in said Section 11.01. This Agreement (except only for the immediately preceding sentence hereof, which is effective upon execution and delivery hereof) shall become effective upon the execution and delivery of the Assignment and Assumption Agreement by the Trustee and the Related Trustee, automatically and without any further signature or action on the part of the Company and the Trustee, and shall thereupon constitute the legal, valid and binding obligation of the parties hereto enforceable against each of the parties hereto in accordance with its terms. Upon such execution and delivery of the Assignment and Assumption Agreement, the Related Trust shall be terminated, the Certificateholders shall receive beneficial interests in the Trust in exchange for their interests in the Related Trust equal to their respective beneficial interests in the Related Trust and the "Outstanding" (as defined in the Related Pass Through Trust Agreement) pass through certificates representing fractional undivided interests in the Related Trust shall be deemed for all purposes of this Agreement, 24 18 without further signature or action of any party or Certificateholder, to be Certificates representing the same Fractional Undivided Interests in the Trust and Trust Property. By acceptance of its Certificate, each Certificateholder consents to and ratifies such assignment, transfer and delivery of the trust property of the Related Trust to the Trustee upon the execution and delivery of the Assignment and Assumption Agreement. Section 2.02. [Intentionally omitted] Section 2.03. Acceptance by Trustee. The Trustee, upon the execution and delivery of the Assignment and Assumption Agreement, acknowledges its acceptance of all right, title and interest in and to the Trust Property and will hold such right, title and interest for the benefit of all then present and future Certificateholders, upon the trusts herein set forth. By its payment for and acceptance of each Certificate issued under the Related Pass Through Trust Agreement and deemed issued under this Agreement, each Holder of such Certificate as grantor of such Trust thereby joins in the creation and declaration of such Trust. Section 2.04. Limitation of Powers. The Trust is constituted solely for the purpose of making the investment in the Equipment Notes, and, except as set forth herein, the Trustee shall not be authorized or empowered to acquire any other investments or engage in any other activities and, in particular, the Trustee shall not be authorized or empowered to do anything that would cause such Trust to fail to qualify as a "grantor trust" for federal income tax purposes (including, as subject to this restriction, acquiring any Aircraft (as defined in the respective Indentures) by bidding such Equipment Notes or otherwise, or taking any action with respect to any such Aircraft once acquired). ARTICLE III THE CERTIFICATES Section 3.01. Title, Form, Denomination and Execution of Certificates. (a) The Initial Certificates shall be known as the "7.68% 1998-1B-S Initial Pass Through Certificates" and the Exchange Certificates shall be known as the "7.68% 1998-1B-S Exchange Pass Through Certificates", in each case, of the Trust. Each Certificate will represent a fractional undivided interest in the Trust and shall be substantially in the form set forth as Exhibit A to the Related Pass Through Trust Agreement, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by the Related Pass Through Trust Agreement or by this Agreement, as the case may be, or as the Trustee may deem appropriate, to reflect the fact that the Certificates are being issued hereunder as opposed to under the Related Pass Through Trust Agreement and may have such letters, numbers or other marks of identification and such legends or endorsements 25 19 placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Certificates, as evidenced by their execution of the Certificates. Any portion of the text of any Certificate may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Certificate. (b) The Initial Certificates shall be issued only in fully registered form without coupons and only in denominations of $100,000 or integral multiples of $1,000 in excess thereof, except that one Certificate may be issued in a denomination of less than $100,000. The Exchange Certificates will be issued in denominations of $1,000 or integral multiples thereof. Each Certificate shall be dated the date of its authentication. The aggregate Fractional Undivided Interest of Certificates initially deemed issued hereunder shall not at any time exceed the aggregate principal amount of "Outstanding" pass through trust certificates representing fractional undivided interests in the Related Trust on the Transfer Date. (c) Initial Certificates offered and sold in reliance on Rule 144A shall be issued initially in the form of a single permanent global Certificate in registered form, substantially in the form set forth as Exhibit A to the Related Pass Through Trust Agreement (the "U.S. Global Certificate"), duly executed and authenticated by the Trustee as hereinafter provided. The U.S. Global Certificate will be registered in the name of a nominee for the Depositary and deposited with the Trustee, as custodian for the Depositary. The aggregate principal amount of the U.S. Global Certificate may from time to time be increased or decreased by adjustments made on the records of the Depositary or its nominee, or of the Trustee, as custodian for the Depositary or its nominee, as hereinafter provided. (d) Initial Certificates offered and sold in offshore transactions in reliance on Regulation S shall be issued initially in the form of a single temporary global Certificate in registered form, substantially in the form set forth as Exhibit A to the Related Pass Through Trust Agreement (the "Temporary Offshore Global Certificate") duly executed and authenticated by the Trustee as hereinafter provided. The Temporary Offshore Global Certificates will be registered in the name of a nominee of the Depositary for credit to the account of the Agent Members acting as depositaries for Euroclear and Cedel and deposited with the Trustee as custodian for the Depositary. At any time following March 21, 1998 (the "Offshore Certificates Exchange Date"), upon receipt by the Trustee of a certificate substantially in the form of Exhibit B to the Related Pass Through Trust Agreement, a single permanent global Certificate in registered form substantially in the form set forth in Exhibit A (the "Permanent Offshore Global Certificate"; and together with the Temporary Offshore Global Certificate, the "Offshore Global Certificates"), duly executed and authenticated by the Trustee as hereinafter provided, shall be registered in the name of a nominee for the Depositary and deposited with the Trustee, as custodian for the Depositary, and the Registrar shall reflect on its books and records the date of such transfer and a decrease in the principal 26 20 amount of any Temporary Offshore Global Certificate in an amount equal to the principal amount of the beneficial interest in such Temporary Offshore Global Certificate transferred. The U.S. Global Certificate and the Offshore Global Certificates are sometimes referred to as the "Global Certificates". (e) Initial Certificates offered and sold to Institutional Accredited Investors shall be issued in the form of permanent certificated Certificates in registered form in substantially the form set forth as Exhibit A to the Related Pass Through Trust Agreement (the "U.S. Physical Certificates"). Certificates issued pursuant to Section 3.05(b) in exchange for interests in any Offshore Global Certificate shall be in the form of permanent certificated Certificates in registered form substantially in the form set forth in Exhibit A (the "Offshore Physical Certificates"). The Offshore Physical Certificates and U.S. Physical Certificates are sometimes collectively herein referred to as the "Physical Certificates". (f) The Exchange Certificates shall be issued in the form of one or more global Certificates substantially in the form of Exhibit A to the Related Pass Through Trust Agreement (each, a "Global Exchange Certificate"), except that (i) the Private Placement Legend (hereinafter defined) shall be omitted and (ii) such Exchange Certificates shall contain such appropriate insertions, omissions, substitutions and other variations from the form set forth in Exhibit A to the Related Pass Through Trust Agreement relating to the nature of the Exchange Certificates as the Responsible Officer of the Trustee executing such Exchange Certificates on behalf of the Trust may determine, as evidenced by such officer's execution on behalf of the Trust of such Exchange Certificates. Such Global Exchange Certificates shall be in registered form and be registered in the name of DTC and deposited with the Trustee, at its Corporate Trust Office, as custodian for DTC. The aggregate principal amount of any Global Exchange Certificate may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC for such Global Exchange Certificate, which adjustments shall be conclusive as to the aggregate principal amount of any such Global Exchange Certificate. Subject to clause (i) and (ii) of the first sentence of this Section 3.01(f), the terms hereof applicable to Restricted Global Certificates and/or Global Certificates shall apply to the Global Exchange Certificates, mutatis mutandis. (g) The definitive Certificates shall be in registered form and shall be typed, printed, lithographed or engraved or produced by any combination of these methods or may be produced in any other manner, all as determined by the officers executing such Certificates, as evidenced by their execution of such Certificates. Section 3.02. Restrictive Legends. (a) Subject to Section 3.06, unless and until (i) an Initial Certificate is sold under an effective Registration Statement or (ii) an Initial Certificate is exchanged for an Exchange Certificate pursuant to an effective Exchange Offer Registration Statement, in each case as provided for in the Registration Rights Agreement, 27 21 each Global Certificate (other than the Permanent Offshore Global Certificate) and each U.S. Physical Certificate shall bear the following legend (the "Private Placement Legend") on the face thereof: THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS CERTIFICATE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT; (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFICATE WAS HELD BY ATLAS AIR, INC., THE TRUSTEE OR ANY AFFILIATE OF ANY OF SUCH PERSONS RESELL OR OTHERWISE TRANSFER THIS CERTIFICATE EXCEPT (A) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (B) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING $100,000 OR MORE AGGREGATE PRINCIPAL AMOUNT OF SUCH CERTIFICATE THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS CERTIFICATE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT; AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS CERTIFICATE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS CERTIFICATE WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFICATE WAS HELD BY ATLAS AIR, 28 22 INC., THE TRUSTEE OR ANY AFFILIATE OF ANY OF SUCH PERSONS THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE PASS THROUGH TRUST AGREEMENT CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS CERTIFICATE IN VIOLATION OF THE FOREGOING RESTRICTIONS. (b) Each Global Certificate shall also bear the following legend on the face thereof: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE PASS THROUGH TRUST AGREEMENT REFERRED TO HEREIN. Section 3.03. Authentication of Certificates. (a) [Intentionally omitted] (b) No Certificate shall be entitled to any benefit under this Agreement or be valid or obligatory for any purpose, unless there appears on such Certificate a certificate of authentication substantially in the form provided for herein executed by the Related Trustee or by the Trustee by the manual signature of one of its authorized signatories, and 29 23 such certificate upon any Certificate shall be conclusive evidence, and the only evidence, that such Certificate has been duly authenticated and delivered hereunder. Section 3.04. Transfer and Exchange. The Trustee shall cause to be kept at the office or agency to be maintained by it in accordance with the provisions of Section 7.12 of this Agreement a register (the "Register") for the Certificates in which, subject to such reasonable regulations as it may prescribe, the Trustee shall provide for the registration of the Certificates and of transfers and exchanges of the Certificates as herein provided. The Trustee shall initially be the registrar (the "Registrar") for the purpose of registering the Certificates and transfers and exchanges of the Certificates as herein provided. A Certificateholder may transfer a Certificate by written application to the Registrar stating the name of the proposed transferee and otherwise complying with the terms of this Agreement, including providing a written certificate or other evidence of compliance with any restrictions on transfer. No such transfer shall be effected until, and such transferee shall succeed to the rights of a Certificateholder only upon, final acceptance and registration of the transfer by the Registrar in the Register. Prior to the registration of any transfer by a Certificateholder as provided herein, the Trustee shall treat the person in whose name the Certificate is registered as the owner thereof for all purposes, and the Trustee shall not be affected by notice to the contrary. Furthermore, the Depositary shall, by acceptance of a Global Certificate, agree that transfers of beneficial interests in such Global Certificate may be effected only through a book-entry system maintained by the Depositary (or its agent), and that ownership of a beneficial interest in the Certificate shall be required to be reflected in a book entry. When Certificates are presented to the Registrar with a request to register the transfer or to exchange them for an equal face amount of Certificates of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its requirements for such transactions are met. To permit registrations of transfers and exchanges in accordance with the terms, conditions and restrictions hereof, the Trustee shall execute and authenticate Certificates at the Registrar's request. No service charge shall be made for any registration of transfer or exchange of the Certificates, but the Trustee may require payment by the transferor of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or other similar governmental charges payable upon exchanges pursuant to Section 3.10 or 9.07). Section 3.05. Book-Entry Provisions for U.S. Global Certificate and Offshore Global Certificates. (a) Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Agreement with respect to any Global Certificate held on their behalf by the Depositary, or the Trustee as its custodian, and the Depositary may be treated by the Trustee and any agent of the Trustee as the absolute owner of such Global Certificate for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Trustee or any agent of the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or shall impair, as between the Depositary 30 24 and its Agent Members, the operation of customary practices governing the exercise of the rights of a holder of any Certificate. Upon the issuance of any Global Certificate, the Registrar or its duly appointed agent shall record a nominee of the Depositary as the registered holder of such Global Certificate. (b) Transfers of any Global Certificate shall be limited to transfers of such Global Certificate or Offshore Global Certificate in whole, but not in part, to nominees of the Depositary, its successor or such successor's nominees. Beneficial interests in the U.S. Global Certificate and any Offshore Global Certificate may be transferred in accordance with the rules and procedures of the Depositary and the provisions of Section 3.06. Beneficial interests in the U.S. Global Certificate or an Offshore Global Certificate shall be delivered to all beneficial owners in the form of U.S. Physical Certificates or Offshore Physical Certificates, as the case may be, if (i) the Depositary notifies the Trustee that it is unwilling or unable to continue as Depositary for the U.S. Global Certificate or such Offshore Global Certificate, as the case may be, and a successor depositary is not appointed by the Trustee within 90 days of such notice or (ii) an Event of Default has occurred and is continuing and the Registrar has received a request from the Depositary to issue Physical Certificates. (c) Any beneficial interest in one of the Global Certificates that is transferred to a Person who takes delivery in the form of an interest in the other Global Certificate will, upon such transfer, cease to be an interest in such Global Certificate and become an interest in the other Global Certificate and, accordingly, will thereafter be subject to all transfer restrictions, if any, and other procedures applicable to beneficial interests in such other Global Certificate for as long as it remains such an interest. (d) In connection with the transfer of the entire U.S. Global Certificate or an entire Offshore Global Certificate to the beneficial owners thereof pursuant to paragraph (b) of this Section 3.05, such U.S. Global Certificate or Offshore Global Certificate, as the case may be, shall be deemed to be surrendered to the Trustee for cancellation, and the Trustee shall execute, authenticate and deliver, to each beneficial owner identified by the Depositary in exchange for its beneficial interest in such U.S. Global Certificate or Offshore Global Certificate, as the case may be, an equal aggregate principal amount of U.S. Physical Certificates or Offshore Physical Certificates, as the case may be, of authorized denominations. (e) Any U.S. Physical Certificate delivered in exchange for an interest in the U.S. Global Certificate pursuant to paragraph (b) of this Section 3.05 shall, except as otherwise provided by paragraph (f) of Section 3.06, bear the Private Placement Legend. (f) Any Offshore Physical Certificate delivered in exchange for an interest in an Offshore Global Certificate pursuant to paragraph (b) of this Section shall, except as 31 25 otherwise provided by paragraph (f) of Section 3.06, bear the applicable legend regarding transfer restrictions set forth in Section 3.02(a). (g) The registered holder of the U.S. Global Certificate or any Offshore Global Certificate may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Agreement or the Certificates. Section 3.06. Special Transfer Provisions. Unless and until (i) an Initial Certificate is sold under an effective Registration Statement, or (ii) an Initial Certificate is exchanged for an Exchange Certificate pursuant to an effective Exchange Offer Registration Statement, in each case pursuant to the Registration Rights Agreement, the following provisions shall apply to such Initial Certificates: (a) Transfers to Non-QIB Institutional Accredited Investors. The following provisions shall apply with respect to the registration of any proposed transfer of a Certificate to any Institutional Accredited Investor which is not a QIB (excluding transfers to or by Non-U.S. Persons): (i) The Registrar shall register the transfer of any Certificate, whether or not such Certificate bears the Private Placement Legend, if (x) the requested transfer is at least three years after the later of the original issue date of the Certificates and the last date on which such Certificate was held by the Company or any affiliate of any such persons or (y) the proposed transferee has delivered to the Registrar a letter substantially in the form of Exhibit D to the Related Pass Through Trust Agreement and the aggregate principal amount of the Certificates being transferred is at least $100,000. (ii) If the proposed transferor is an Agent Member holding a beneficial interest in the U.S. Global Certificate, upon receipt by the Registrar of (x) the documents, if any, required by paragraph (i) and (y) instructions given in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records the date of the transfer and a decrease in the principal amount of such U.S. Global Certificate in an amount equal to the principal amount of the beneficial interest in such U.S. Global Certificate to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver to the transferor or at its direction, one or more U.S. Physical Certificates of like tenor and amount. (b) Transfers to QIBs. The following provisions shall apply with respect to the registration of any proposed transfer of an Initial Certificate to a QIB (excluding Non-U.S. Persons): 32 26 (i) If the Certificate to be transferred consists of U.S. Physical Certificates or an interest in any Temporary Offshore Global Certificate, the Registrar shall register the transfer if such transfer is being made by a proposed transferor who has checked the box provided for on the form of Initial Certificate stating, or has otherwise advised the Trustee and the Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on the form of Initial Certificate stating, or has otherwise advised the Trustee and the Registrar in writing, that it is purchasing the Initial Certificate for its own account or an account with respect to which it exercises sole investment discretion and that it, or the Person on whose behalf it is acting with respect to any such account, is a QIB within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Trust and/or the Company as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A. (ii) Upon receipt by the Registrar of the documents referred to in clause (i) above and instructions given in accordance with the Depositary's and the Registrar's procedures therefor, the Registrar shall reflect on its books and records the date of such transfer and an increase in the principal amount of the U.S. Global Certificate in an amount equal to the principal amount of the U.S. Physical Certificates or interests in the Temporary Offshore Global Certificate, as the case may be, being transferred, and the Trustee shall cancel such Physical Certificates or decrease the amount of such Temporary Offshore Global Certificate so transferred. (c) Transfers of Interests in the Permanent Offshore Global Certificate or Offshore Physical Certificates. The Registrar shall register any transfer of interests in the Permanent Offshore Global Certificate or Offshore Physical Certificates without requiring any additional certification. (d) Transfers to Non-U.S. Persons at Any Time. The following provisions shall apply with respect to any registration of any transfer of an Initial Certificate to a Non-U.S. Person: (i) Prior to the Offshore Certificates Exchange Date, the Registrar shall register any proposed transfer of an Initial Certificate to a Non-U.S. Person upon receipt of a certificate substantially in the form set forth as Exhibit C to the Related Pass Through Trust Agreement from the proposed transferor. 33 27 (ii) On and after the Offshore Certificates Exchange Date, the Registrar shall register any proposed transfer to any Non-U.S. Person if the Certificate to be transferred is a U.S. Physical Certificate or an interest in the U.S. Global Certificate, upon receipt of a certificate substantially in the form of Exhibit C from the proposed transferor. The Registrar shall promptly send a copy of such certificate to the Company. (iii) Upon receipt by the Registrar of (x) the documents, if any, required by paragraph (ii) and (y) instructions in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records the date of such transfer and a decrease in the principal amount of such U.S. Global Certificate in an amount equal to the principal amount of the beneficial interest in such U.S. Global Certificate to be transferred, and (B) upon receipt by the Registrar of instructions given in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Offshore Global Certificate in an amount equal to the principal amount of the U.S. Physical Certificate or the U.S. Global Certificate, as the case may be, to be transferred, and the Trustee shall cancel the Physical Certificate, if any, so transferred or decrease the amount of such U.S. Global Certificate. (e) Private Placement Legend. Upon the transfer, exchange or replacement of Certificates not bearing the Private Placement Legend, the Registrar shall deliver Certificates that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Certificates bearing the Private Placement Legend, the Registrar shall deliver only Certificates that bear the Private Placement Legend unless either (i) the circumstances contemplated by paragraph (a)(i)(x) or (e)(ii) of this Section 3.06 exist or (ii) there is delivered to the Registrar an Opinion of Counsel to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act. (f) General. By its acceptance of any Certificate bearing the Private Placement Legend, each Holder of such a Certificate acknowledges the restrictions on transfer of such Certificate set forth in this Agreement and agrees that it will transfer such Certificate only as provided in this Agreement. The Registrar shall not register a transfer of any Certificate unless such transfer complies with the restrictions on transfer of such Certificate set forth in this Agreement. In connection with any transfer of Certificates, each Certificateholder agrees by its acceptance of the Certificates to furnish the Registrar or the Trustee such certifications, legal opinions or other information as either of them may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or a transaction not subject to, 34 28 the registration requirements of the Securities Act; provided that the Registrar shall not be required to determine the sufficiency of any such certifications, legal opinions or other information. Until such time as no Certificates remain Outstanding, the Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 3.05 or this Section 3.06. The Trustee, if not the Registrar at such time, shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar. Section 3.07. Mutilated, Destroyed, Lost or Stolen Certificates. If (a) any mutilated Certificate is surrendered to the Registrar or the Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Certificate and (b) there is delivered to the Registrar and the Trustee such security, indemnity or bond, as may be required by them to save each of them harmless, then, in the absence of notice to the Registrar or the Trustee that such destroyed, lost or stolen Certificate has been acquired by a bona fide purchaser, and provided that the requirements of Section 8-405 of the Uniform Commercial Code in effect in any applicable jurisdiction are met, the Trustee shall execute, authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate or Certificates, in authorized denominations and of like Fractional Undivided Interest and bearing a number not contemporaneously outstanding. In connection with the issuance of any new Certificate under this Section 3.07, the Trustee may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee and the Registrar) connected therewith. Any duplicate Certificate issued pursuant to this Section 3.07 shall constitute conclusive evidence of the appropriate Fractional Undivided Interest in the Trust, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Certificates. Section 3.08. Persons Deemed Owners. Prior to due presentment of a Certificate for registration of transfer, the Trustee, the Registrar and any Paying Agent may treat the Person in whose name any Certificate is registered (as of the day of determination) as the owner of such Certificate for the purpose of receiving distributions pursuant to Article 35 29 IV and for all other purposes whatsoever, and none of the Trustee, the Registrar or any Paying Agent shall be affected by any notice to the contrary. Section 3.09. Cancellation. All Certificates surrendered for payment or transfer or exchange shall, if surrendered to the Trustee or any agent of the Trustee other than the Registrar, be delivered to the Registrar for cancellation and shall promptly be cancelled by it. No Certificates shall be authenticated in lieu of or in exchange for any Certificates cancelled as provided in this Section, except as expressly permitted by this Agreement. All cancelled Certificates held by the Registrar shall be destroyed and a certification of their destruction delivered to the Trustee. Section 3.10. Temporary Certificates. Until definitive Certificates are ready for delivery, the Trustee shall authenticate temporary Certificates. Temporary Certificates shall be substantially in the form of definitive Certificates but may have insertions, substitutions, omissions and other variations determined to be appropriate by the officers executing the temporary Certificates, as evidenced by their execution of such temporary Certificates. If temporary Certificates are issued, the Trustee will cause definitive Certificates to be prepared without unreasonable delay. After the preparation of definitive Certificates, the temporary Certificates shall be exchangeable for definitive Certificates upon surrender of the temporary Certificates at the office or agency of the Trustee designated for such purpose pursuant to Section 7.12, without charge to the Certificateholder. Upon surrender for cancellation of any one or more temporary Certificates, the Trustee shall execute, authenticate and deliver in exchange therefor a like face amount of definitive Certificates of authorized denominations. Until so exchanged, the temporary Certificates shall be entitled to the same benefits under this Agreement as definitive Certificates. Section 3.11. Limitation of Liability for Payments. All payments and distributions made to Certificateholders shall be made only from the Trust Property and only to the extent that the Trustee shall have sufficient income or proceeds from the Trust Property to make such payments in accordance with the terms of Article IV of this Agreement. Each Certificateholder, by its acceptance of a Certificate, agrees that it will look solely to the income and proceeds from the Trust Property for any payment or distribution due to such Certificateholder pursuant to the terms of this Agreement and that it will not have any recourse to the Company, the Trustee, the Loan Trustees, the Liquidity Providers, the Owner Trustees or the Owner Participants, except as otherwise expressly provided herein or in the Intercreditor Agreement. The Company is a party to this Agreement solely for purposes of meeting the requirements of the Trust Indenture Act, and therefore shall not have any right, obligation or liability hereunder (except as otherwise expressly provided herein). 36 30 ARTICLE IV DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS Section 4.01. Certificate Account and Special Payments Account. (a) The Trustee shall establish and maintain on behalf of the Certificateholders a Certificate Account as one or more non-interest-bearing accounts. The Trustee shall hold such Certificate Account in trust for the benefit of the Certificateholders, and shall make or permit withdrawals therefrom only as provided in this Agreement. On each day when a Scheduled Payment is made to the Trustee under the Intercreditor Agreement with respect to the Certificates, the Trustee, upon receipt thereof, shall immediately deposit the aggregate amount of such Scheduled Payment in such Certificate Account. (b) The Trustee shall establish and maintain on behalf of the Certificateholders a Special Payments Account as one or more accounts, which shall be non-interest bearing except as provided in Section 4.04. The Trustee shall hold the Special Payments Account in trust for the benefit of the Certificateholders and shall make or permit withdrawals therefrom only as provided in this Agreement. On each day when one or more Special Payments are made to the Trustee under the Intercreditor Agreement and upon payment of the Special Redemption Premium to the Trustee under the Note Purchase Agreement with respect to the Certificates, the Trustee, upon receipt thereof, shall immediately deposit the aggregate amount of such Special Payments in such Special Payments Account. (c) The Trustee shall present (or, if applicable, cause the Subordination Agent to present) to the related Loan Trustee of each Equipment Note such Equipment Note on the date of its stated final maturity or, in the case of any Equipment Note which is to be redeemed in whole pursuant to the related Indenture, on the applicable redemption date under such Indenture. Section 4.02. Distributions from Certificate Account and Special Payments Account. (a) On each Regular Distribution Date with respect to a series of Certificates or as soon thereafter as the Trustee has confirmed receipt of the payment of all or any part of the Scheduled Payments due on the Equipment Notes held (subject to the Intercreditor Agreement) in the related Trust on such date, the Trustee shall distribute out of the applicable Certificate Account the entire amount deposited therein pursuant to Section 4.01(a). There shall be so distributed to each Certificateholder of record of such series on the Record Date with respect to such Regular Distribution Date (other than as provided in Section 11.01 concerning the final distribution) by check mailed to such Certificateholder, at the address appearing in the Register, such Certificateholder's pro rata share (based on the Fractional Undivided Interest in the Trust held by such Certificateholder) 37 31 of the total amount in the applicable Certificate Account, except that, with respect to Certificates registered on the Record Date in the name of a Clearing Agency (or its nominee), such distribution shall be made by wire transfer in immediately available funds to the account designated by such Clearing Agency (or such nominee). (b) On each Special Distribution Date with respect to any Special Payment with respect to the Certificates or as soon thereafter as the Trustee has confirmed receipt of any Special Payments due on the Equipment Notes held (subject to the Intercreditor Agreement) in the related Trust or realized upon the sale of such Equipment Notes or receipt of the Special Redemption Premium, the Trustee shall distribute out of the applicable Special Payments Account the entire amount of such applicable Special Payment deposited therein pursuant to Section 4.01(b). There shall be so distributed to each Certificateholder of record of such series on the Record Date with respect to such Special Distribution Date (other than as provided in Section 11.01 concerning the final distribution) by check mailed to such Certificateholder, at the address appearing in the Register, such Certificateholder's pro rata share (based on the Fractional Undivided Interest in the related Trust held by such Certificateholder) of the total amount in the applicable Special Payments Account on account of such Special Payment, except that, with respect to Certificates registered on the Record Date in the name of a Clearing Agency (or its nominee), such distribution shall be made by wire transfer in immediately available funds to the account designated by such Clearing Agency (or such nominee). (c) The Trustee shall, at the expense of the Company, cause notice of each Special Payment with respect to a series of Certificates to be mailed to each Certificateholder at his address as it appears in the Register. In the event of redemption or purchase of Equipment Notes held in the related Trust, such notice shall be mailed not less than 15 days prior to the Special Distribution Date for the Special Payment resulting from such redemption or purchase, which Special Distribution Date shall be the date of such redemption or purchase. In the event that any Special Redemption Premium is to be paid by the Company to the Trustee under the Note Purchase Agreement, such notice shall be mailed, together with the notice by the Escrow Paying Agent under Section 2.06 of the Escrow Agreement, not less than 20 days prior to the Special Distribution Date for such amount, which Special Distribution Date shall be the Final Withdrawal Date. In the case of any other Special Payments, such notice shall be mailed as soon as practicable after the Trustee has confirmed that it has received funds for such Special Payment, stating the Special Distribution Date for such Special Payment which shall occur not less than 15 days after the date of such notice and as soon as practicable thereafter. Notices mailed by the Trustee shall set forth: (i) the Special Distribution Date and the Record Date therefor (except as otherwise provided in Section 11.01); 38 32 (ii) the amount of the Special Payment for each $1,000 face amount Certificate and the amount thereof constituting principal, premium, if any, and interest; (iii) the reason for the Special Payment; and (iv) if the Special Distribution Date is the same date as a Regular Distribution Date for the Certificates, the total amount to be received on such date for each $1,000 face amount Certificate. If the amount of (i) premium, if any, payable upon the redemption or purchase of an Equipment Note or (ii) the Special Redemption Premium, if any, has not been calculated at the time that the Trustee mails notice of a Special Payment, it shall be sufficient if the notice sets forth the other amounts to be distributed and states that any premium received will also be distributed. If any redemption of the Equipment Notes held in any Trust is cancelled, the Trustee, as soon as possible after learning thereof, shall cause notice thereof to be mailed to each Certificateholder at its address as it appears on the Register. Section 4.03. Statements to Certificateholders. (a) On each Regular Distribution Date and Special Distribution Date, the Trustee will include with each distribution of a Scheduled Payment or Special Payment, as the case may be, to Certificateholders a statement setting forth the information provided below (in the case of a Special Payment, including any Special Redemption Premium, reflecting in part the information provided by the Escrow Paying Agent under the Escrow Agreement). Such statement shall set forth (per $1,000 aggregate principal amount of Certificate as to (ii), (iii), (iv) and (v) below) the following information: (i) the aggregate amount of funds distributed on such Distribution Date under the Agreement and under the Escrow Agreement, indicating the amount allocable to each source; (ii) the amount of such distribution under this Agreement allocable to principal and the amount allocable to premium (including the Special Redemption Premium), if any; (iii) the amount of such distribution under this Agreement allocable to interest; (iv) the amount of such distribution under the Escrow Agreement allocable to interest; 39 33 (v) the amount of such distribution under the Escrow Agreement allocable to Deposits; and (vi) the Pool Balance and the Pool Factor. With respect to the Certificates registered in the name of a Clearing Agency or its nominee, on the Record Date prior to each Distribution Date, the Trustee will request from the Clearing Agency a securities position listing setting forth the names of all Clearing Agency Participants reflected on the Clearing Agency's books as holding interests in the Certificates on such Record Date. On each Distribution Date, the Trustee will mail to each such Clearing Agency Participant the statement described above and will make available additional copies as requested by such Clearing Agency Participant for forwarding to holders of interests in the Certificates. (b) Within a reasonable period of time after the end of each calendar year but not later than the latest date permitted by law, the Trustee shall furnish to each Person who at any time during such calendar year was a Certificateholder of record a statement containing the sum of the amounts determined pursuant to clauses (a)(i), (a)(ii), (a)(iii), (a)(iv) and (a)(v) above with respect to the related Trust for such calendar year or, in the event such Person was a Certificateholder of record during a portion of such calendar year, for the applicable portion of such year, and such other items as are readily available to the Trustee and which a Certificateholder shall reasonably request as necessary for the purpose of such Certificateholder's preparation of its federal income tax returns. Such statement and such other items shall be prepared on the basis of information supplied to the Trustee by the Clearing Agency Participants and shall be delivered by the Trustee to such Clearing Agency Participants to be available for forwarding by such Clearing Agency Participants to the holders of interests in the Certificates in the manner described in Section 4.03(a). (c) Promptly following (i) the Transfer Date, if there has been any change in the information set forth in clauses (x), (y) and (z) below from that set forth in page 65 of the Offering Memorandum, and (ii) any early redemption or purchase of, or any default in the payment of principal or interest in respect of, any of the Equipment Notes held in the Trust, or any Final Withdrawal, the Trustee shall furnish to Certificateholders of record on such date a statement setting forth (x) the expected Pool Balances for each subsequent Regular Distribution Date following the Transfer Date, (y) the related Pool Factors for such Regular Distribution Dates and (z) the expected principal distribution schedule of the Equipment Notes, in the aggregate, held as Trust Property at the date of such notice. With respect to the Certificates registered in the name of a Clearing Agency, on the Transfer Date, the Trustee will request from such Clearing Agency a securities position listing setting forth the names of all Clearing Agency Participants reflected on such Clearing Agency's books as holding interests in the Certificates on such date. The Trustee will mail to each such Clearing Agency Participant the statement described above and will make available additional copies as requested by such Clearing Agency Participant for forwarding to holders of interests in the Certificates. 40 34 Section 4.04. Investment of Special Payment Moneys. Any money received by the Trustee pursuant to Section 4.01(b) representing a Special Payment which is not distributed on the date received shall, to the extent practicable, be invested in Permitted Investments by the Trustee pending distribution of such Special Payment pursuant to Section 4.02. Any investment made pursuant to this Section 4.04 shall be in such Permitted Investments having maturities not later than the date that such moneys are required to be used to make the payment required under Section 4.02 on the applicable Special Distribution Date and the Trustee shall hold any such Permitted Investments until maturity. The Trustee shall have no liability with respect to any investment made pursuant to this Section 4.04, other than by reason of the willful misconduct or negligence of the Trustee. All income and earnings from such investments shall be distributed on such Special Distribution Date as part of such Special Payment. ARTICLE V THE COMPANY Section 5.01. Maintenance of Corporate Existence. The Company, at its own cost and expense, will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights and franchises, except as otherwise specifically permitted in Section 5.02; provided, however, that the Company shall not be required to preserve any right or franchise if the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company. Section 5.02. Consolidation, Merger, Etc. The Company shall not consolidate with or merge into any other corporation or convey, transfer or lease substantially all of its assets as an entirety to any Person unless: (a) the corporation formed by such consolidation or into which the Company is merged or the Person that acquires by conveyance, transfer or lease substantially all of the assets of the Company as an entirety shall be (i) organized and validly existing under the laws of the United States of America or any state thereof or the District of Columbia, (ii) a "citizen of the United States" as defined in 49 U.S.C. Section 40102(a)(15), as amended, and (iii) a United States certificated air carrier, if and so long as such status is a condition of entitlement to the benefits of Section 1110 of the Bankruptcy Reform Act of 1978, as amended (11 U.S.C. Section 1110), with respect to the Leases or the Aircraft owned by the Company; 41 35 (b) the corporation formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance, transfer or lease substantially all of the assets of the Company as an entirety shall execute and deliver to the Trustee applicable to the Certificates a duly authorized, valid, binding and enforceable agreement in form and substance reasonably satisfactory to the Trustee containing an assumption by such successor corporation or Person of the due and punctual performance and observance of each covenant and condition of the Note Documents and of this Agreement applicable to the Certificates to be performed or observed by the Company; and (c) the Company shall have delivered to the Trustee an Officer's Certificate of the Company and an Opinion of Counsel of the Company reasonably satisfactory to the Trustee, each stating that such consolidation, merger, conveyance, transfer or lease and the assumption agreement mentioned in clause (b) above comply with this Section 5.02 and that all conditions precedent herein provided for relating to such transaction have been complied with. Upon any consolidation or merger, or any conveyance, transfer or lease of substantially all of the assets of the Company as an entirety in accordance with this Section 5.02, the successor corporation or Person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Agreement applicable to the Certificates with the same effect as if such successor corporation or Person had been named as the Company herein. No such conveyance, transfer or lease of substantially all of the assets of the Company as an entirety shall have the effect of releasing any successor corporation or Person which shall have become such in the manner prescribed in this Section 5.02 from its liability in respect of this Agreement and any Note Document applicable to the Certificates to which it is a party. ARTICLE VI DEFAULT Section 6.01. Events of Default. (a) Exercise of Remedies. Upon the occurrence and during the continuation of any Indenture Default under any Indenture, the Trustee may, to the extent it is the Controlling Party at such time (as determined pursuant to the Intercreditor Agreement), direct the exercise of remedies as provided in the Intercreditor Agreement. 42 36 (b) Purchase Rights of Certificateholders. By acceptance of its Certificate, each Certificateholder agrees that at any time after the occurrence and during the continuation of a Triggering Event, (i) each Class C Certificateholder shall have the right to purchase all, but not less than all, of the Certificates and the Class A Certificates upon ten days' written notice to the Trustee, the Class A Trustee and each other Class C Certificateholder, provided that (A) if prior to the end of such ten-day period any other Class C Certificateholder notifies such purchasing Class C Certificateholder that such other Class C Certificateholder wants to participate in such purchase, then such other Class C Certificateholder may join with the purchasing Class C Certificateholder to purchase all, but not less than all, of the Certificates and the Class A Certificates pro rata based on the Fractional Undivided Interest in the Class C Trust held by each such Class C Certificateholder and (B) if prior to the end of such ten-day period any other Class C Certificateholder fails to notify the purchasing Class C Certificateholder of such other Class C Certificateholder's desire to participate in such a purchase, then such other Class C Certificateholder shall lose its right to purchase the Certificates pursuant to this Section 6.01(b); and (ii) each Class D Certificateholder shall have the right (which shall not expire upon any purchase of the Certificates pursuant to clause (i) above) to purchase all, but not less than all, of the Certificates, the Class A Certificates and the Class C Certificates upon ten days' written notice to the Trustee, the Class A Trustee, the Class C Trustee and each other Class D Certificateholder, provided that (A) if prior to the end of such ten-day period any other Class D Certificateholder notifies such purchasing Class D Certificateholder that such other Class D Certificateholder wants to participate in such purchase, then such other Class D Certificateholder may join with the purchasing Class D Certificateholder to purchase all, but not less than all, of the Certificates, the Class A Certificates and the Class C Certificates pro rata based on the Fractional Undivided Interest in the Class D Trust held by each such Class D Certificateholder and (B) if prior to the end of such ten-day period any other Class D Certificateholder fails to notify the purchasing Class D Certificateholder of such other Class D Certificateholder's desire to participate in such a purchase, then such other Class D Certificateholder shall lose its right to purchase the Certificates pursuant to this Section 6.01(b). The purchase price with respect to the Certificates shall be equal to the Pool Balance of the Certificates, together with accrued and unpaid interest thereon to the date of such purchase, without premium, but including any other amounts then due and payable to the Certificateholders under this Agreement, the Intercreditor Agreement, the Escrow Agreement or any Note Document or on or in respect of the Certificates; provided, however, that (i) if such purchase occurs after the record date specified in Section 2.03(b) of the 43 37 Escrow Agreement relating to the distribution of unused Deposits and accrued and unpaid interest thereunder, such purchase price shall be reduced by the aggregate amount of unused Deposits and interest to be distributed under the Escrow Agreement (which deducted amounts shall remain distributable to, and may be retained by, the Certificateholder as of such Record Date) and (ii) if such purchase occurs after a Record Date, such purchase price shall be reduced by the amount to be distributed hereunder on the related Distribution Date (which deducted amounts shall remain distributable to, and may be retained by, the Certificateholder as of such Record Date); provided further that no such purchase of Certificates shall be effective unless the purchaser(s) shall certify to the Trustee that contemporaneously with such purchase, such purchaser(s) is purchasing, pursuant to the terms of this Agreement and the Other Agreements, the Certificates, the Class A Certificates and the Class C Certificates which are senior to the securities held by such purchaser(s). Each payment of the purchase price of the Certificates referred to in the first sentence hereof shall be made to an account or accounts designated by the Trustee and each such purchase shall be subject to the terms of this Section 6.01(b). Each Certificateholder agrees by its acceptance of its Certificate that it will, subject to Section 3.04 of this Agreement, upon payment from such Class C Certificateholder(s) or Class D Certificateholder(s), as the case may be, of the purchase price set forth in the first sentence of this paragraph, forthwith sell, assign, transfer and convey to the purchaser(s) thereof (without recourse, representation or warranty of any kind except for its own acts), all of the right, title, interest and obligation of such Certificateholder in this Agreement, the Escrow Agreement, the Deposit Agreement, the Intercreditor Agreement, the Liquidity Facilities, the Note Documents and all Certificates and Escrow Receipts held by such Certificateholder (excluding all right, title and interest under any of the foregoing to the extent such right, title or interest is with respect to an obligation not then due and payable as respects any action or inaction or state of affairs occurring prior to such sale) and the purchaser shall assume all of such Certificateholder's obligations under this Agreement, the Escrow Agreement, the Deposit Agreement, the Intercreditor Agreement, the Liquidity Facilities, the Note Documents and all such Certificates and Escrow Receipts. The Certificates will be deemed to be purchased on the date payment of the purchase price is made notwithstanding the failure of the Certificateholders to deliver any Certificates and, upon such a purchase, (i) the only rights of the Certificateholders will be to deliver the Certificates to the purchaser(s) and receive the purchase price for such Certificates and (ii) if the purchaser(s) shall so request, such Certificateholder will comply with all the provisions of Section 3.04 of this Agreement to enable new Certificates to be issued to the purchaser in such denominations as it shall request. All charges and expenses in connection with the issuance of any such new Certificates shall be borne by the purchaser thereof. As used in this Section 6.01, the terms "Class A Certificateholder", "Class A Trust", "Class A Certificate", "Class A Trustee", "Class C Certificate", "Class C Certificateholder", "Class C Trust", "Class C Trustee", "Class D Certificateholder" and "Class D Trust", shall have the respective meanings assigned to such terms in the Intercreditor Agreement. 44 38 Section 6.02. Incidents of Sale of Equipment Notes. Upon any sale of all or any part of the Equipment Notes held in the Trust made either under the power of sale given under this Agreement or otherwise for the enforcement of this Agreement, the following shall be applicable: (a) Certificateholders and Trustee May Purchase Equipment Notes. Any Certificateholder, the Trustee in its individual or any other capacity or any other Person may bid for and purchase any of the Equipment Notes held in the Trust, and upon compliance with the terms of sale, may hold, retain, possess and dispose of such Equipment Notes in their own absolute right without further accountability. (b) Receipt of Trustee Shall Discharge Purchaser. The receipt of the Trustee making such sale shall be a sufficient discharge to any purchaser for his purchase money, and, after paying such purchase money and receiving such receipt, such purchaser or its personal representative or assigns shall not be obliged to see to the application of such purchase money, or be in any way answerable for any loss, misapplication or nonapplication thereof. (c) Application of Moneys Received upon Sale. Any moneys collected by the Trustee upon any sale made either under the power of sale given by this Agreement or otherwise for the enforcement of this Agreement shall be applied as provided in Section 4.02. Section 6.03. Judicial Proceedings Instituted by Trustee; Trustee May Bring Suit. If there shall be a failure to make payment of the principal of, premium, if any, or interest on any Equipment Note held in the Trust, or if there shall be any failure to pay Rent (as defined in the relevant Lease) under any Lease when due and payable, then the Trustee, in, its own name and as trustee of an express trust, as holder of such Equipment Notes, to the extent permitted by and in accordance with the terms of any related Intercreditor Agreement and any related Note Documents (subject to rights of the applicable Owner Trustee or Owner Participant to cure any such failure to pay principal of, premium, if any, or interest on any Equipment Note or to pay Rent under any Lease in accordance with the applicable Indenture), shall be entitled and empowered to institute any suits, actions or proceedings at law, in equity or otherwise, for the collection of the sums so due and unpaid on such Equipment Notes or under such Lease and may prosecute any such claim or proceeding to judgment or final decree with respect to the whole amount of any such sums so due and unpaid. Section 6.04. Control by Certificateholders. Subject to Section 6.03 and the Intercreditor Agreement, the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the related Trust shall have the right to direct the time, method and place of conducting any proceeding for any 45 39 remedy available to the Trustee with respect to the Trust or pursuant to the terms of the Intercreditor Agreement, or exercising any trust or power conferred on the Trustee under this Agreement or the Intercreditor Agreement, including any right of the Trustee as Controlling Party under the Intercreditor Agreement or as holder of the Equipment Notes held in the related Trust; provided, however, that (a) such Direction shall not in the opinion of the Trustee be in conflict with any rule of law or with this Agreement and would not involve the Trustee in personal liability or expense, (b) the Trustee shall not determine that the action so directed would be unjustly prejudicial to the Certificateholders not taking part in such Direction, and (c) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such Direction. Section 6.05. Waiver of Past Defaults. Subject to any related Intercreditor Agreement, the Certificateholders holding Certificates of a series evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust (i) may on behalf of all of the Certificateholders waive any past Event of Default hereunder and its consequences or (ii) if the Trustee is the Controlling Party, may direct the Trustee to instruct the applicable Loan Trustee to waive any past Indenture Event of Default under any related Indenture and its consequences, and thereby annul any Direction given by such Certificateholders or the Trustee to such Loan Trustee with respect thereto, except a default: (a) in the deposit of any Scheduled Payment or Special Payment under Section 4.01 or in the distribution of any payment under Section 4.02 on the Certificates, or (b) in the payment of the principal of (premium, if any) or interest on the Equipment Notes held in the Trust, or (c) in respect of a covenant or provision hereof which under Article IX hereof cannot be modified or amended without the consent of each Certificateholder holding an Outstanding Certificate of a series affected thereby. Upon any such waiver, such default shall cease to exist with respect to the Certificates and any Event of Default arising therefrom shall be deemed to have been cured for every purpose and any direction given by the Trustee on behalf of the Certificateholders to the relevant Loan Trustee shall be annulled with respect thereto; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. 46 40 Upon any such waiver, the Trustee shall vote the Equipment Notes issued under the relevant Indenture to waive the corresponding Indenture Event of Default. Section 6.06. Right of Certificateholders to Receive Payments Not to Be Impaired. Anything in this Agreement to the contrary notwithstanding, including, without limitation, Section 6.07 hereof, but subject to the Intercreditor Agreement, the right of any Certificateholder to receive distributions of payments required pursuant to Section 4.02 hereof on the applicable Certificates when due, or to institute suit for the enforcement of any such payment on or after the applicable Regular Distribution Date or Special Distribution Date, shall not be impaired or affected without the consent of such Certificateholder. Section 6.07. Certificateholders May Not Bring Suit Except Under Certain Conditions. A Certificateholder shall not have the right to institute any suit, action or proceeding at law or in equity or otherwise with respect to this Agreement, for the appointment of a receiver or for the enforcement of any other remedy under this Agreement, unless: (a) such Certificateholder previously shall have given written notice to the Trustee of a continuing Event of Default; (b) Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than 25% of the related Trust shall have requested the Trustee in writing to institute such action, suit or proceeding and shall have offered to the Trustee indemnity as provided in Section 7.03(e); (c) the Trustee shall have refused or neglected to institute any such action, suit or proceeding for 60 days after receipt of such notice, request and offer of indemnity; and (d) no direction inconsistent with such written request shall have been given to the Trustee during such 60-day period by Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust. It is understood and intended that no one or more of the Certificateholders shall have any right in any manner whatsoever hereunder or under the related Trust Supplement or under the Certificates to (i) surrender, impair, waive, affect, disturb or prejudice any property in the Trust Property of the Trust, or the lien of any related Indenture on any property subject thereto, or the rights of the Certificateholders or the holders of the Equipment Notes, (ii) obtain or seek to obtain priority over or preference with respect to any other such Certificateholder or (iii) enforce any right under this Agreement, except in the 47 41 manner herein provided and for the equal, ratable and common benefit of all the Certificateholders subject to the provisions of this Agreement. Section 6.08. Remedies Cumulative. Every remedy given hereunder to the Trustee or to any of the Certificateholders shall not be exclusive of any other remedy or remedies, and every such remedy shall be cumulative and in addition to every other remedy given hereunder or now or hereafter given by statute, law, equity or otherwise. Section 6.09. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Agreement, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of such suit, and may assess costs against any such party litigant, in the manner and to the extent provided in the Trust Indenture Act; provided, however, that neither this Section 6.09 nor the Trust Indenture Act shall be deemed to authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Company. ARTICLE VII THE TRUSTEE Section 7.01. Certain Duties and Responsibilities. (a) Except during the continuance of an Event of Default in respect of a Trust, the Trustee undertakes to perform such duties in respect of the Trust as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Trustee. (b) In case an Event of Default in respect of a Trust has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Agreement in respect of the Trust, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (c) No provision of this Agreement shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that (i) this Subsection shall not be construed to limit the effect of Subsection (a) of this Section 7.01; and 48 42 (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts. (d) Whether or not herein expressly so provided, every provision of this Agreement relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 7.01. Section 7.02. Notice of Defaults. As promptly as practicable after, and in any event within 90 days after, the occurrence of any default (as such term is defined below) hereunder known to the Trustee, the Trustee shall transmit by mail to the Company, any Owner Trustees, the Owner Participants, the Loan Trustees and the Certificateholders holding Certificates in accordance with Section 313(c) of the Trust Indenture Act, notice of such default hereunder known to the Trustee, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal, premium, if any, or interest on any Equipment Note, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith shall determine that the withholding of such notice is in the interests of the Certificateholders. For the purpose of this Section 7.02 in respect of any Trust, the term "default" means any event that is, or after notice or lapse of time or both would become, an Event of Default in respect of that Trust. Section 7.03. Certain Rights of Trustee. Subject to the provisions of Section 315 of the Trust Indenture Act: (a) the Trustee may rely and shall be protected in acting or refraining from acting in reliance upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Request; (c) whenever in the administration of this Agreement or the Intercreditor Agreement, the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officer's Certificate of the Company, any Owner Trustee or any Loan Trustee; 49 43 (d) the Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement or the Intercreditor Agreement at the Direction of any of the Certificateholders pursuant to this Agreement or the Intercreditor Agreement, unless the Certificateholders shall have offered to the Trustee reasonable security or indemnity against the cost, expenses and liabilities which might be incurred by it in compliance with such Direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document; (g) the Trustee may execute any of the trusts or powers under this Agreement or the Intercreditor Agreement or perform any duties under this Agreement or the Intercreditor Agreement either directly or by or through agents or attorneys, and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it under this Agreement or the Intercreditor Agreement; (h) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the Direction of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Agreement or the Intercreditor Agreement; and (i) the Trustee shall not be required to expend or risk its own funds in the performance of any of its duties under this Agreement, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk is not reasonably assured to it. Section 7.04. Not Responsible for Recitals or Issuance of Certificates. The recitals contained herein and in the Certificates, except the certificates of authentication, shall not be taken as the statements of the Trustee, and the Trustee assumes no responsibility for their correctness. Subject to Section 7.15, the Trustee makes no representations as to the validity or sufficiency of this Agreement, any Equipment Notes, the Intercreditor Agreement, 50 44 the Deposit Agreement, the Escrow Agreement, the Certificates, or any Note Documents, except that the Trustee hereby represents and warrants that this Agreement has been, and the Registration Rights Agreement, each Certificate, the Note Purchase Agreement, the Escrow Agreement and the Intercreditor Agreement will be, executed and delivered by one of its officers who is duly authorized to execute and deliver such document on its behalf. Section 7.05. May Hold Certificates. The Trustee, any Paying Agent, Registrar or any of their Affiliates or any other agent, in their respective individual or any other capacity, may become the owner or pledgee of Certificates and, subject to Sections 310(b) and 311 of the Trust Indenture Act, if applicable, may otherwise deal with the Company, any Owner Trustees or the Loan Trustees with the same rights it would have if it were not Trustee, Paying Agent, Registrar or such other agent. Section 7.06. Money Held in Trust. Money held by the Trustee or the Paying Agent in trust under this Agreement need not be segregated from other funds except to the extent required herein or by law and neither the Trustee nor the Paying Agent shall have any liability for interest upon any such moneys except as provided for herein. Section 7.07. Compensation and Reimbursement. The Company agrees: (a) to pay, or cause to be paid, to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); and (b) to reimburse, or cause to be reimbursed, the Trustee upon its request for all reasonable out- of-pocket expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Agreement or the Intercreditor Agreement (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence, willful misconduct or bad faith or as may be incurred due to the Trustee's breach of its representations and warranties set forth in Section 7.15; and (c) to indemnify the Trustee with respect to the Certificates, pursuant to Section 8.1 of the Owned Aircraft Participation Agreements and Section 9.1 of the Leased Aircraft Participation Agreements, as the case may be. The Trustee shall be entitled to reimbursement from, and shall have a lien prior to the Certificates upon, all property and funds held or collected by the Trustee in its capacity as Trustee for any tax incurred without negligence, bad faith or willful misconduct, on its part, arising out of or in connection with the acceptance or administration of the Trust 51 45 (other than any tax attributable to the Trustee's compensation for serving as such), including any costs and expenses incurred in contesting the imposition of any such tax. The Trustee shall notify the Company of any claim for any tax for which it may seek reimbursement. If the Trustee reimburses itself from the Trust Property of such Trust for any such tax, it will mail a brief report within 30 days setting forth the amount of such tax and the circumstances thereof to all Certificateholders as their names and addresses appear in the Register. Section 7.08. Corporate Trustee Required; Eligibility. The Trust shall at all times have a Trustee which shall be eligible to act as a trustee under Section 310(a) of the Trust Indenture Act and shall have a combined capital and surplus of at least $75,000,000 (or a combined capital and surplus in excess of $5,000,000 and the obligations of which, whether now in existence or hereafter incurred, are fully and unconditionally guaranteed by a corporation organized and doing business under the laws of the United States, any state or territory thereof or of the District of Columbia and having a combined capital and surplus of at least $75,000,000). If such corporation publishes reports of conditions at least annually, pursuant to law or to the requirements of federal, state, territorial or District of Columbia supervising or examining authority, then for the purposes of this Section 7.08 the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of conditions so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 7.08 to act as Trustee of the Trust, the Trustee shall resign immediately as Trustee of the Trust in the manner and with the effect specified in Section 7.09. Section 7.09. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee of the Trust pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 7.10. (b) The Trustee may resign at any time as Trustee of the Trust by giving prior written notice thereof to the Company, the Authorized Agents, the Owner Trustees and the Loan Trustees. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Company, the Owner Trustees and the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by Direction of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in such Trust delivered to the Trustee and to the Company, the Owner Trustees and the Loan Trustees. 52 46 (d) If at any time in respect of the Trust: (i) the Trustee shall fail to comply with Section 310 of the Trust Indenture Act, if applicable, after written request therefor by the Company or by any Certificateholder who has been a bona fide Certificateholder for at least six months; or (ii) the Trustee shall cease to be eligible under Section 7.08 and shall fail to resign after written request therefor by the Company or by any such Certificateholder; or (iii) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then, in any case, (i) the Company may remove the Trustee or (ii) any Certificateholder who has been a bona fide Certificateholder for at least six months may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee of the Trust. (e) If a Responsible Officer of the Trustee shall obtain actual knowledge of an Avoidable Tax (as defined below) in respect of any Trust which has been or is likely to be asserted, the Trustee shall promptly notify the Company and shall, within 30 days of such notification, resign as Trustee of such Trust hereunder unless within such 30-day period the Trustee shall have received notice that the Company has agreed to pay such tax. The Company shall promptly appoint a successor Trustee of such Trust in a jurisdiction where there are no Avoidable Taxes. As used herein, an "Avoidable Tax" in respect of such Trust means a state or local tax: (i) upon (w) such Trust, (x) such Trust Property, (y) Certificateholders of the Trust or (z) the Trustee for which the Trustee is entitled to seek reimbursement from the Trust Property of such Trust, and (ii) which would be avoided if the Trustee were located in another state, or jurisdiction within a state, within the United States of America. A tax shall not be an Avoidable Tax in respect of any Trust if the Company or any Owner Trustee shall agree to pay, and shall pay, such tax. (f) If the Trustee shall resign, be removed or become incapable of acting as Trustee of the Trust or if a vacancy shall occur in the office of the Trustee of the Trust for any cause, the Company shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or other occurrence of such vacancy, a successor Trustee shall be appointed by Direction of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in such Trust delivered to the Company, the Owner Trustees, the Loan Trustee and 53 47 the retiring Trustee, then the successor Trustee so appointed shall, with the approval of the Company of such appointment, which approval shall not be unreasonably withheld, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed as provided above. If no successor Trustee shall have been so appointed as provided above and accepted appointment in the manner hereinafter provided, the resigning Trustee or any Certificateholder who has been a bona fide Certificateholder of the related series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (g) The successor Trustee shall give notice of the resignation and removal of the Trustee and appointment of the successor Trustee by mailing written notice of such event by first-class mail, postage prepaid, to the Certificateholders as their names and addresses appear in the Register. Each notice shall include the name of such successor Trustee and the address of its Corporate Trust Office. Section 7.10. Acceptance of Appointment by Successor. Every successor Trustee appointed hereunder shall execute and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Company or the successor Trustee, such retiring Trustee shall execute and deliver an instrument transferring to such successor Trustee all such rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all Trust Property held by such retiring Trustee, subject nevertheless to its lien, if any, provided for in Section 7.07. Upon request of any such successor Trustee, the Company, the retiring Trustee and such successor Trustee shall execute and deliver any and all instruments containing such provisions as shall be necessary or desirable to transfer and confirm to, and for more fully and certainly vesting in, such successor Trustee all such rights, powers and trusts. No institution shall accept its appointment as a Trustee hereunder unless at the time of such acceptance such institution shall be qualified and eligible under this Article VII. Section 7.11. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder; provided, however, that such corporation shall be otherwise qualified and eligible under this Article VII, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Certificates shall have been executed or authenticated, but 54 48 not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such execution or authentication and deliver the Certificates so executed or authenticated with the same effect as if such successor Trustee had itself executed or authenticated such Certificates. Section 7.12. Maintenance of Agencies. (a) With respect to each series of Certificates, there shall at all times be maintained an office or agency in the location set forth in Section 12.04 where Certificates may be presented or surrendered for registration of transfer or for exchange, and for payment thereof, and where notices and demands, to or upon the Trustee in respect of such Certificates or this Agreement may be served; provided, however, that, if it shall be necessary that the Trustee maintain an office or agency in another location with respect to the Certificates (e.g., the Certificates shall be represented by Definitive Certificates and shall be listed on a national securities exchange), the Trustee will make all reasonable efforts to establish such an office or agency. Written notice of the location of each such other office or agency and of any change of location thereof shall be given by the Trustee to the Company, any Owner Trustees, the Loan Trustees (in the case of any Owner Trustee or Loan Trustee, at its address specified in the Note Documents or such other address as may be notified to the Trustee) and the Certificateholders. In the event that no such office or agency shall be maintained or no such notice of location or of change of location shall be given, presentations and demands may be made and notices may be served at the Corporate Trust Office of the Trustee. (b) There shall at all times be a Registrar and a Paying Agent hereunder with respect to the Certificates. Each such Authorized Agent shall be a bank or trust company, shall be a corporation organized and doing business under the laws of the United States or any state, with a combined capital and surplus of at least $75,000,000, or a corporation having a combined capital and surplus in excess of $5,000,000, the obligations of which are guaranteed by a corporation organized and doing business under the laws of the United States or any state, with a combined capital and surplus of at least $75,000,000, and shall be authorized under such laws to exercise corporate trust powers, subject to supervision by federal or state authorities. The Trustee shall initially be the Paying Agent and, as provided in Section 3.04, Registrar hereunder with respect to the Certificates. Each Registrar shall furnish to the Trustee, at stated intervals of not more than six months, and at such other times as the Trustee may request in writing, a copy of the Register maintained by such Registrar. (c) Any corporation into which any Authorized Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which any Authorized Agent shall be a party, or any corporation succeeding to the corporate trust business of any Authorized Agent, shall be the successor of such Authorized Agent, if such successor corporation is otherwise eligible under 55 49 this Section 7.12, without the execution or filing of any paper or any further act on the part of the parties hereto or such Authorized Agent or such successor corporation. (d) Any Authorized Agent may at any time resign by giving written notice of resignation to the Trustee, the Company, any Owner Trustees and the Loan Trustees. The Company may, and at the request of the Trustee shall, at any time terminate the agency of any Authorized Agent by giving written notice of termination to such Authorized Agent and to the Trustee. Upon the resignation or termination of an Authorized Agent or in case at any time any such Authorized Agent shall cease to be eligible under this Section 7.12 (when, in either case, no other Authorized Agent performing the functions of such Authorized Agent shall have been appointed), the Company shall promptly appoint one or more qualified successor Authorized Agents, reasonably satisfactory to the Trustee, to perform the functions of the Authorized Agent which has resigned or whose agency has been terminated or who shall have ceased to be eligible under this Section 7.12. The Company shall give written notice of any such appointment made by it to the Trustee, any Owner Trustees and the Loan Trustees; and in each case the Trustee shall mail notice of such appointment to all Certificateholders as their names and addresses appear on the Register for such series. (e) The Company agrees to pay, or cause to be paid, from time to time to each Authorized Agent reasonable compensation for its services and to reimburse it for its reasonable expenses. Section 7.13. Money for Certificate Payments to Be Held in Trust. All moneys deposited with any Paying Agent for the purpose of any payment on Certificates shall be deposited and held in trust for the benefit of the Certificateholders entitled to such payment, subject to the provisions of this Section 7.13. Moneys so deposited and held in trust shall constitute a separate trust fund for the benefit of the Certificateholders with respect to which such money was deposited. The Trustee may at any time, for the purpose of obtaining the satisfaction and discharge of this Agreement or for any other purpose, direct any Paying Agent to pay to the Trustee all sums held in trust by such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Section 7.14. Registration of Equipment Notes in Trustee's Name. Subject to the provisions of any Intercreditor Agreement, the Trustee agrees that all Equipment Notes to be purchased by any Trust and Permitted Investments, if any, shall be issued in the name of the Trustee as trustee for the applicable Trust or its nominee and held by the Trustee in trust for the benefit of the Certificateholders, or, if not so held, the Trustee or its nominee shall be reflected as the owner of such Equipment Notes or Permitted Investments, as the case may be, in the register of the issuer of such Equipment Notes or Permitted Investments, as the case may be. 56 50 Section 7.15. Representations and Warranties of Trustee. The Trustee hereby represents and warrants, on the Transfer Date, that: (a) the Trustee is a Delaware banking corporation organized and validly existing in good standing under the laws of the State of Delaware; (b) the Trustee has full power, authority and legal right to receive the Trust Property assigned by the Related Trustee, assume the obligations under, and perform, the Assignment and Assumption Agreement, this Agreement, the Intercreditor Agreement, the Escrow Agreement and the Note Documents and has taken all necessary action to authorize such receipt, assumption and performance by it of this Agreement, the Intercreditor Agreement, the Escrow Agreement and the Note Documents to which it is a party; (c) the receipt of the Trust Property under the Assignment and Assumption Agreement and the performance by the Trustee of the Assignment and Assumption Agreement, this Trust Supplement, the Intercreditor Agreement, the Escrow Agreement and the Note Documents (i) will not violate any provision of any United States federal law or the law of the state of the United States where it is located governing the banking and trust powers of the Trustee or any order, writ, judgment, or decree of any court, arbitrator or governmental authority applicable to the Trustee or any of its assets, (ii) will not violate any provision of the articles of association or by-laws of the Trustee, and (iii) will not violate any provision of, or constitute, with or without notice or lapse of time, a default under, or result in the creation or imposition of any lien on any properties included in the Trust Property pursuant to the provisions of any mortgage, indenture, contract, agreement or other undertaking to which it is a party, which violation, default or lien could reasonably be expected to have an adverse effect on the Trustee's performance or ability to perform its duties hereunder or thereunder or on the transactions contemplated herein or therein; (d) the receipt of the Trust Property under the Assignment and Assumption Agreement and the performance by the Trustee of the Assignment and Assumption Agreement, this Agreement, the Intercreditor Agreement, the Escrow Agreement and the Note Documents will not require the authorization, consent, or approval of, the giving of notice to, the filing or registration with, or the taking of any other action in respect of, any governmental authority or agency of the United States or the state of the United States where it is located regulating the banking and corporate trust activities of the Trustee; and 57 51 (e) The Assignment and Assumption Agreement has been duly executed and delivered by the Trustee and this Agreement, the Intercreditor Agreement, the Escrow Agreement and the Note Documents have been, or will be, as applicable, duly executed and delivered by the Trustee and constitute, or will constitute, as applicable, the legal, valid and binding agreements of the Trustee, enforceable against it in accordance with their respective terms; provided, however, that enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and (ii) general principles of equity. Section 7.16. Withholding Taxes; Information Reporting. As to the Certificates, the Trustee, as trustee of the related grantor trust created by this Agreement, shall exclude and withhold from each distribution of principal, premium, if any, and interest and other amounts due under this Agreement or under the Certificates any and all withholding taxes applicable thereto as required by law. The Trustee agrees to act as such withholding agent and, in connection therewith, whenever any present or future taxes or similar charges are required to be withheld with respect to any amounts payable in respect of the Certificates, to withhold such amounts and timely pay the same to the appropriate authority in the name of and on behalf of the Certificateholders, that it will file any necessary withholding tax returns or statements when due, and that, as promptly as possible after the payment thereof, it will deliver to each such Certificateholder appropriate documentation showing the payment thereof, together with such additional documentary evidence as such Certificateholders may reasonably request from time to time. The Trustee agrees to file any other information reports as it may be required to file under United States law. Section 7.17. Trustee's Liens. The Trustee in its individual capacity agrees that it will, in respect of each Trust created by this Agreement, at its own cost and expense promptly take any action as may be necessary to duly discharge and satisfy in full any mortgage, pledge, lien, charge, encumbrance, security interest or claim ("Trustee's Liens") on or with respect to the Trust Property of such Trust which is attributable to the Trustee either (i) in its individual capacity and which is unrelated to the transactions contemplated by this Agreement, the Intercreditor Agreement, the Note Purchase Agreement or the Note Documents or (ii) as Trustee hereunder or in its individual capacity and which arises out of acts or omissions which are not contemplated by this Agreement. Section 7.18. Preferential Collection of Claims. The Trustee shall comply with Section 311(a) of the Trust Indenture Act, excluding any creditor relationship listed in Section 311(b) of the Trust Indenture Act. If the Trustee shall resign or be removed as Trustee, it shall be subject to Section 311(a) of the Trust Indenture Act to the extent provided therein. 58 52 ARTICLE VIII CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE Section 8.01. The Company to Furnish Trustee with Names and Addresses of Certificateholders. The Company will furnish to the Trustee within 15 days after each Record Date with respect to a Scheduled Payment, and at such other times as the Trustee may request in writing within 30 days after receipt by the Company of any such request, a list, in such form as the Trustee may reasonably require, of all information in the possession or control of the Company as to the names and addresses of the Certificateholders, in each case as of a date not more than 15 days prior to the time such list is furnished; provided, however, that so long as the Trustee is the sole Registrar, no such list need be furnished; and provided further, however, that no such list need be furnished for so long as a copy of the Register is being furnished to the Trustee pursuant to Section 7.12. Section 8.02. Preservation of Information; Communications to Certificateholders. The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Certificateholders contained in the most recent list furnished to the Trustee as provided in Section 7.12 or Section 8.01, as the case may be, and the names and addresses of Certificateholders of each series received by the Trustee in its capacity as Registrar, if so acting. The Trustee may destroy any list furnished to it as provided in Section 7.12 or Section 8.01, as the case may be, upon receipt of a new list so furnished. Section 8.03. Reports by Trustee. Within 60 days after May 15 of each year commencing with the first full year following the issuance of any series of Certificates, the Trustee shall transmit to the Certificateholders, as provided in Section 313(c) of the Trust Indenture Act, a brief report dated as of such May 15, if required by Section 313(a) of the Trust Indenture Act. Section 8.04. Reports by the Company. The Company shall: (a) file with the Trustee, within 30 days after the Company is required to file the same with the SEC, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may from time to time by rules and regulations prescribe) which the Company is required to file with the SEC pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934, as amended; or, if the Company is not required to file information, documents or reports pursuant to either of such sections, then to file with the Trustee and the SEC, in accordance with rules and regulations prescribed by the SEC, such of the supplementary and periodic information, documents and reports which may be required pursuant to section 13 of the Securities Exchange Act of 1934, 59 53 as amended, in respect of a security listed and registered on a national securities exchange as may be prescribed in such rules and regulations; (b) file with the Trustee and the SEC, in accordance with the rules and regulations prescribed by the SEC, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of the Company provided for in this Agreement, as may be required by such rules and regulations, including, in the case of annual reports, if required by such rules and regulations, certificates or opinions of independent public accountants, conforming to the requirements of Section 1.02; (c) transmit to all Certificateholders, in the manner and to the extent provided in Section 313(c) of the Trust Indenture Act such summaries of any information, documents and reports required to be filed by the Company pursuant to subsections (a) and (b) of this Section 8.04 as may be required by rules and regulations prescribed by the SEC; and (d) furnish to the Trustee, not less often than annually, a brief certificate from the principal executive officer, principal financial officer or principal accounting officer as to his knowledge of the Company's compliance with all conditions and covenants under this Agreement (it being understood that for purposes of this paragraph (d), such compliance shall be determined without regard to any period of grace or requirement of notice provided under this Agreement). ARTICLE IX SUPPLEMENTAL AGREEMENTS Section 9.01. Supplemental Agreements Without Consent of Certificateholders. Without the consent of the Certificateholders, the Company may (but will not be required to), and the Trustee (subject to Section 9.03) shall, at the Company's request, at any time and from time to time, enter into one or more agreements supplemental hereto or to the Intercreditor Agreement, the Escrow Agreement, the Note Purchase Agreement, the Deposit Agreement or a Liquidity Facility, in form satisfactory to the Trustee, for any of the following purposes: (a) to provide for the formation of a Trust, the issuance of a series of Certificates and other matters contemplated by Section 2.01; or (b) to evidence the succession of another corporation to the Company and the assumption by any such successor of the covenants of the Company herein 60 54 contained or of the Company's obligations under the Intercreditor Agreement, the Note Purchase Agreement, the Indemnity Agreement or any Liquidity Facility or to evidence the succession of another corporation to the Depositary or any Liquidity Provider and the assumption by any such successor of the obligations of the Depositary or such Liquidity Provider, as the case may be, under the Intercreditor Agreement, the Note Purchase Agreement, the Deposit Agreement, the Indemnity Agreement or any Liquidity Facility; or (c) to add to the covenants of the Company for the benefit of the Certificateholders, or to surrender any right or power conferred upon the Company in this Agreement, the Intercreditor Agreement, the Note Purchase Agreement or any Liquidity Facility; or (d) to correct or supplement any provision in this Agreement, the Intercreditor Agreement, the Escrow Agreement, the Note Purchase Agreement, the Deposit Agreement or any Liquidity Facility which may be defective or inconsistent with any other provision herein or therein or to cure any ambiguity or to modify any other provision with respect to matters or questions arising under this Agreement, the Intercreditor Agreement, the Escrow Agreement, the Note Purchase Agreement, the Deposit Agreement or any Liquidity Facility, provided, however, that any such action shall not materially adversely affect the interests of the Certificateholders; to correct any mistake in this Agreement, the Intercreditor Agreement or any Liquidity Facility; or, as provided in the Intercreditor Agreement, to give effect to or provide for a Replacement Liquidity Facility (as defined in the Intercreditor Agreement); or (e) to comply with any requirement of the SEC, any applicable law, rules or regulations of any exchange or quotation system on which the Certificates are listed or of any regulatory body; or (f) to modify, eliminate or add to the provisions of this Agreement, the Intercreditor Agreement or any Liquidity Facility to such extent as shall be necessary to continue the qualification of this Agreement, the Intercreditor Agreement or any Liquidity Facility (including any supplemental agreement) under the Trust Indenture Act or under any similar Federal statute hereafter enacted, and to add to this Agreement, the Intercreditor Agreement or any Liquidity Facility such other provisions as may be expressly permitted by the Trust Indenture Act, excluding, however, the provisions referred to in Section 316(a)(2) of the Trust Indenture Act as in effect at the date as of which this Agreement was executed or any corresponding provision in any similar Federal statute hereafter enacted; or (g) to evidence and provide for the acceptance of appointment under this Agreement, the Intercreditor Agreement or any Liquidity Facility by a successor 61 55 Trustee and to add to or change any of the provisions of this Agreement, the Intercreditor Agreement or any Liquidity Facility as shall be necessary to provide for or facilitate the administration of the Trust, pursuant to the requirements of Section 7.10; or (h) to provide the information required under Section 7.12 and Section 12.04 as to the Trustee; or (i) to make any other amendments or modifications hereto, provided, however, that such amendments or modifications shall apply to Certificates to be thereafter issued; provided, however, that no such supplemental agreement shall adversely affect the status of any Trust as a grantor trust under Subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as amended, for U.S. federal income tax purposes. Section 9.02. Supplemental Agreements with Consent of Certificateholders. With respect to the Trust and the Certificates, with the consent of the Certificateholders (including consents obtained in connection with a tender offer or exchange offer for the Certificates) evidencing Fractional Undivided Interests aggregating not less than a majority in interest in such Trust, by Direction of said Certificateholders delivered to the Company and the Trustee, the Company may (with the consent of the Owner Trustees, if any, relating to the Certificates, which consent shall not be unreasonably withheld), but shall not be obligated to, and the Trustee (subject to Section 9.03) shall, enter into an agreement or agreements supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement, the Intercreditor Agreement, the Escrow Agreement, the Deposit Agreement, the Note Purchase Agreement or any Liquidity Facility to the extent applicable to such Certificateholders or of modifying in any manner the rights and obligations of such Certificateholders under this Agreement, the Intercreditor Agreement, the Escrow Agreement, the Deposit Agreement, the Note Purchase Agreement or any Liquidity Facility; provided, however, that no such agreement shall, without the consent of the Certificateholder of each Outstanding Certificate affected thereby: (a) reduce in any manner the amount of, or delay the timing of, any receipt by the Trustee of payments on the Equipment Notes held in such Trust or distributions that are required to be made herein on any Certificate, or change any date of payment on any Certificate, or change the place of payment where, or the coin or currency in which, any Certificate is payable, or impair the right to institute suit for the enforcement of any such payment or distribution on or after the Regular Distribution Date or Special Distribution Date applicable thereto; or 62 56 (b) permit the disposition of any Equipment Note included in the Trust Property of such Trust except as permitted by this Agreement, or otherwise deprive such Certificateholder of the benefit of the ownership of the Equipment Notes in such Trust; or (c) alter the priority of distributions specified in the Intercreditor Agreement in a manner materially adverse to the interests of the Certificateholders; or (d) reduce the specified percentage of the aggregate Fractional Undivided Interests of such Trust that is required for any such supplemental agreement, or reduce such specified percentage required for any waiver (of compliance with certain provisions of this Agreement or certain defaults hereunder and their consequences) provided for in this Agreement; or (e) modify any of the provisions of this Section 9.02 or Section 6.05, except to increase any such percentage or to provide that certain other provisions of this Agreement cannot be modified or waived without the consent of the Certificateholder of each Certificate affected thereby; or (f) adversely affect the status of any Trust as a grantor trust under Subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as amended, for U.S. federal income tax purposes. It shall not be necessary for any Direction of such Certificateholders under this Section 9.02 to approve the particular form of any proposed supplemental agreement, but it shall be sufficient if such Direction shall approve the substance thereof. Section 9.03. Documents Affecting Immunity or Indemnity. If in the opinion of the Trustee any document required to be executed by it pursuant to the terms of Section 9.01 or 9.02 affects any interest, right, duty, immunity or indemnity in favor of the Trustee under this Agreement or any Trust Supplement, the Trustee may in its discretion decline to execute such document. Section 9.04. Execution of Supplemental Agreements. In executing, or accepting the additional trusts created by, any supplemental agreement permitted by this Article or the modifications thereby of the trusts created by this Agreement, the Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental agreement is authorized or permitted by this Agreement. Section 9.05. Effect of Supplemental Agreements. Upon the execution of any agreement supplemental to this Agreement under this Article, this Agreement shall be 63 57 modified in accordance therewith, and such supplemental agreement shall form a part of this Agreement for all purposes; and every Certificateholder theretofore or thereafter authenticated and delivered hereunder shall be bound thereby to the extent applicable to such series. Section 9.06. Conformity with Trust Indenture Act. Every supplemental agreement executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. Section 9.07. Reference in Certificates to Supplemental Agreements. Certificates authenticated and delivered after the execution of any supplemental agreement pursuant to this Article may bear a notation in form approved by the Trustee as to any matter provided for in such supplemental agreement; and, in such case, suitable notation may be made upon Outstanding Certificates after proper presentation and demand. ARTICLE X AMENDMENTS TO INDENTURE AND NOTE DOCUMENTS Section 10.01. Amendments and Supplements to Indenture and Other Note Documents. In the event that the Trustee, as holder (or beneficial owner through the Subordination Agent) of any Equipment Notes (or as a prospective purchaser of any Postponed Notes) in trust for the benefit of the Certificateholders or as Controlling Party under an Intercreditor Agreement, receives (directly or indirectly through the Subordination Agent) a request for a consent to any amendment, modification, waiver or supplement under any Indenture, other Note Document or any other related document, which request would require the consent of Certificateholders under Section 9.02 hereof, the Trustee shall forthwith send a notice of such proposed amendment, modification, waiver or supplement to each Certificateholder registered on the Register as of the date of such notice. The Trustee shall request from the Certificateholders a Direction as to (a) whether or not to take or refrain from taking (or direct the Subordination Agent to take or refrain from taking) any action which a holder of (or, with respect to Postponed Notes, a prospective purchaser of) such Equipment Note or a Controlling Party has the option to direct, (b) whether or not to give or execute (or direct the Subordination Agent to give or execute) any waivers, consents, amendments, modifications or supplements as a holder of (or, with respect to Postponed Notes, a prospective purchaser of) such Equipment Note or as Controlling Party and (c) how to vote (or direct the Subordination Agent to vote) any Equipment Note (or, with respect to a Postponed Note, its commitment to acquire such Postponed Note) if a vote has been called for with respect thereto. Provided such a request for Certificateholder Direction shall have been made, in directing any action or casting any vote or giving any consent as the holder of any Equipment Note (or in directing the Subordination Agent in any of the foregoing), 64 58 (i) other than as Controlling Party, the Trustee shall vote for or give consent to any such action with respect to such Equipment Note (or Postponed Note) in the same proportion as that of (A) the aggregate face amounts of all Certificates actually voted in favor of or for giving consent to such action by such Direction of Certificateholders to (B) the aggregate face amount of all Outstanding Certificates and (ii) as Controlling Party, the Trustee shall vote as directed in such Certificateholder Direction by the Certificateholders evidencing a Fractional Undivided Interest aggregating not less than a majority in interest in the Trust. For purposes of the immediately preceding sentence, a Certificate shall have been "actually voted" if the Holder of such Certificate has delivered to the Trustee an instrument evidencing such Holder's consent to such Direction prior to one Business Day before the Trustee directs such action or casts such vote or gives such consent. Notwithstanding the foregoing, but subject to Section 6.04 and any Intercreditor Agreement, the Trustee may, with respect to the Certificates, in its own discretion and at its own direction, consent and notify the relevant Loan Trustee of such consent (or direct the Subordination Agent to consent and notify the Loan Trustee of such consent) to any amendment, modification, waiver or supplement under any related Indenture or any other related Note Document if an Event of Default hereunder shall have occurred and be continuing or if such amendment, modification, waiver or supplement will not materially adversely affect the interests of the Certificateholders. ARTICLE XI TERMINATION OF TRUSTS Section 11.01. Termination of the Trust. The respective obligations and responsibilities of the Company and the Trustee shall terminate upon the distribution to all Certificateholders and the Trustee of all amounts required to be distributed to them pursuant to this Agreement and the disposition of all property held as part of the Trust Property; provided, however, that in no event shall the Trust continue beyond one hundred ten (110) years following the date of the execution of this Agreement. Notice of any termination, specifying the Distribution Date upon which the Certificateholders may surrender their Certificates to the Trustee for payment of the final distribution and cancellation, shall be mailed promptly by the Trustee to Certificateholders not earlier than the 60th day and not later than the 15th day next preceding such final Distribution Date specifying (A) the Distribution Date upon which the proposed final payment of the Certificates will be made upon presentation and surrender of Certificates at the office or agency of the Trustee therein specified, (B) the amount of any such proposed final payment, and (c) that the Record Date otherwise applicable to such Distribution Date is not applicable, payments being made only upon presentation and surrender of the Certificates at the office or agency of the Trustee therein specified. The Trustee shall give such notice to the Registrar at the time such notice is given to Certificateholders. Upon presentation and 65 59 surrender of the Certificates in accordance with such notice, the Trustee shall cause to be distributed to Certificateholders such final payments. In the event that all of the Certificateholders shall not surrender their Certificates for cancellation within six months after the date specified in the above-mentioned written notice, the Trustee shall give a second written notice to the remaining Certificateholders to surrender their Certificates for cancellation and receive the final distribution with respect thereto. No additional interest shall accrue on the Certificates after the Distribution Date specified in the first written notice. In the event that any money held by the Trustee for the payment of distributions on the Certificates shall remain unclaimed for two years (or such lesser time as the Trustee shall be satisfied, after sixty days' notice from the Company, is one month prior to the escheat period provided under applicable law) after the final distribution date with respect thereto, the Trustee shall pay to each Loan Trustee the appropriate amount of money relating to such Loan Trustee and shall give written notice thereof to the related Owner Trustees, the Owner Participants and the Company. ARTICLE XII MISCELLANEOUS PROVISIONS Section 12.01. Limitation on Rights of Certificateholders. The death or incapacity of any Certificateholder shall not operate to terminate this Agreement or the Trust, nor entitle such Certificateholder's legal representatives or heirs to claim an accounting or to take any action or commence any proceeding in any court for a partition or winding up of the Trust, nor otherwise affect the rights, obligations, and liabilities of the parties hereto or any of them. Section 12.02. Liabilities of Certificateholders. Neither the existence of the Trust nor any provision in this Agreement is intended to or shall limit the liability the Certificateholders would otherwise incur if the Certificateholders owned Trust Property as co-owners, or incurred any obligations of the Trust, directly rather than through the Trust. Section 12.03. Registration of Equipment Notes in Name of Subordination Agent. If the Trust is party to the Intercreditor Agreement, the Trustee agrees that all Equipment Notes to be purchased by such Trust shall be issued in the name of the Subordination Agent under the Intercreditor Agreement or its nominee and held by such Subordination Agent in trust for the benefit of the Certificateholders, or, if not so held, such Subordination Agent or its nominee shall be reflected as the owner of such Equipment Notes in the register of the issuer of such Equipment Notes. 66 60 Section 12.04. Notices. (a) Unless otherwise specifically provided herein, all notices required under the terms and provisions of this Agreement shall be in English and in writing, and any such notice may be given by United States mail, courier service or telecopy, and any such notice shall be effective when delivered or received or, if mailed, three days after deposit in the United States mail with proper postage for ordinary mail prepaid, (i) if to the Company: Atlas Air, Inc. 538 Commons Drive Golden, CO 80401 Attention: Chief Financial Officer Facsimile: (303) 526-5051 (ii) if to the Trustee: Wilmington Trust Company One Rodney Square 1100 N. Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Department Facsimile: (302) 651-8882 (b) The Company or the Trustee, by notice to the other, may designate additional or different addresses for subsequent notices or communications. (c) Any notice or communication to Certificateholders shall be mailed by first-class mail to the addresses for Certificateholders shown on the Register kept by the Registrar and to addresses filed with the Trustee for Certificate Owners. Failure so to mail a notice or communication or any defect in such notice or communication shall not affect its sufficiency with respect to other Certificateholders or Certificate Owners. (d) If a notice or communication is mailed in the manner provided above within the time prescribed, it is conclusively presumed to have been duly given, whether or not the addressee receives it. (e) If the Company mails a notice or communication to the Certificateholders, it shall mail a copy to the Trustee and to each Paying Agent for such series at the same time. 67 61 (f) Notwithstanding the foregoing, all communications or notices to the Trustee shall be deemed to be given only when received by a Responsible Officer of the Trustee. (g) The Trustee shall promptly furnish the Company with a copy of any demand, notice or written communication received by the Trustee hereunder from any Certificateholder, Owner Trustee or Loan Trustee. Section 12.05. Governing Law. THIS AGREEMENT HAS BEEN DELIVERED IN THE STATE OF NEW YORK AND, TOGETHER WITH THE CERTIFICATES, SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. Section 12.06. Severability of Provisions. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions, or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement or the Trust, or of the Certificates or the rights of the Certificateholders thereof. Section 12.07. Trust Indenture Act Controls. Upon the occurrence of any Registration Event, this Agreement shall become subject to the provisions of the Trust Indenture Act and shall, to the extent applicable, be governed by such provisions. From and after any Registration Event, if any provision of this Agreement limits, qualifies or conflicts with another provision which is required to be included in this Agreement by the Trust Indenture Act, the required provision shall control. Section 12.08. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. Section 12.09. Successors and Assigns. All covenants, agreements, representations and warranties in this Agreement by the Trustee and the Company shall bind and, to the extent permitted hereby, shall inure to the benefit of and be enforceable by their respective successors and assigns, whether so expressed or not. Section 12.10. Benefits of Agreement. Nothing in this Agreement or in the Certificates, express or implied, shall give to any Person, other than the parties hereto and 68 62 their successors hereunder, and the Certificateholders, any benefit or any legal or equitable right, remedy or claim under this Agreement. Section 12.11. Legal Holidays. In any case where any Regular Distribution Date or Special Distribution Date relating to any Certificate shall not be a Business Day, then (notwithstanding any other provision of this Agreement) payment need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on such Regular Distribution Date or Special Distribution Date, and no interest shall accrue during the intervening period. Section 12.12. Counterparts. For the purpose of facilitating the execution of this Agreement and for other purposes, this Agreement may be executed simultaneously in any number of counterparts, each of which counterparts shall be deemed to be an original, and all of which counterparts shall constitute but one and the same instrument. Section 12.13. Communication by Certificateholders with Other Certificateholders. Certificateholders may communicate with other Certificateholders with respect to their rights under this Agreement or the Certificates pursuant to Section 312(b) of the Trust Indenture Act. The Company, the Trustee and any and all other persons benefitted by this Agreement shall have the protection afforded by Section 312(c) of the Trust Indenture Act. Section 12.14. Intention of Parties. The parties hereto intend that each Trust be classified for U.S. federal income tax purposes as a grantor trust under Subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as amended, and not as a trust or association taxable as a corporation or as a partnership. The Trustee agrees to hold all assets of each Trust for investment purposes only. Each Certificateholder and Investor, by its acceptance of its Certificate or a beneficial interest therein, agrees to treat the Trust as a grantor trust for all U.S. federal, state and local income tax purposes. The powers granted and obligations undertaken pursuant to this Agreement shall be so construed so as to further such intent. 69 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed by their respective officers hereunto duly authorized as of the day and year first written above. ATLAS AIR, INC. By: /s/ RICHARD H. SHUYLER ----------------------------------- Name: Richard H. Shuyler Title: Chief Financial Officer, Sr. Vice Pres., Finance; and Corporate Treasurer WILMINGTON TRUST COMPANY, as Trustee By: /s/ JAMES P. LAWLER ----------------------------------- Name: James P. Lawler Title: Vice President EX-10.94 8 PASS THROUGH TRUST AGREEMENT 1998-1C-O 1 EXHIBIT 10.94 EXECUTION COPY - -------------------------------------------------------------------------------- PASS THROUGH TRUST AGREEMENT Dated as of February 9, 1998 between ATLAS AIR, INC. and WILMINGTON TRUST COMPANY as Trustee $123,180,000 Atlas Air Pass Through Trust 1998-1C-O 8.01% Atlas Air 1998-1C-O Initial Pass Through Certificates 8.01% Atlas Air 1998-1C-O Exchange Pass Through Certificates - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 1.02. Compliance Certificates and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 1.03. Form of Documents Delivered to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 1.04. Directions of Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE II ORIGINAL ISSUANCE OF CERTIFICATES: ACQUISITION OF TRUST PROPERTY Section 2.01. Delivery of Documents; Delivery Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 2.02. Withdrawal of Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 2.03. Acceptance by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 2.04. Limitation of Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 ARTICLE III THE CERTIFICATES Section 3.01. Title, Form, Denomination and Execution of Certificates . . . . . . . . . . . . . . . . . . . . . 20 Section 3.02. Restrictive Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 3.03. Authentication of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 3.04. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 3.05. Book-Entry Provisions for U.S. Global Certificate and Offshore Global Certificates . . . . . . . . 25 Section 3.06. Special Transfer Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Section 3.07. Mutilated, Destroyed, Lost or Stolen Certificates . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 3.08. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 3.09. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 3.10. Temporary Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 3.11. Limitation of Liability for Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
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Page ---- ARTICLE IV DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS Section 4.01. Certificate Account and Special Payments Account . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 4.02. Distributions from Certificate Account and Special Payments Account . . . . . . . . . . . . . . . 32 Section 4.03. Statements to Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Section 4.04. Investment of Special Payment Moneys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 ARTICLE V THE COMPANY Section 5.01. Maintenance of Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Section 5.02. Consolidation, Merger, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 ARTICLE VI DEFAULT Section 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 6.02. Incidents of Sale of Equipment Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Section 6.03. Judicial Proceedings Instituted by Trustee; Trustee May Bring Suit . . . . . . . . . . . . . . . . 40 Section 6.04. Control by Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Section 6.05. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Section 6.06. Right of Certificateholders to Receive Payments Not to Be Impaired . . . . . . . . . . . . . . . . 42 Section 6.07. Certificateholders May Not Bring Suit Except Under Certain Conditions . . . . . . . . . . . . . . 42 Section 6.08. Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Section 6.09. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 ARTICLE VII THE TRUSTEE Section 7.01. Certain Duties and Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Section 7.02. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Section 7.03. Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Section 7.04. Not Responsible for Recitals or Issuance of Certificates . . . . . . . . . . . . . . . . . . . . . 45 Section 7.05. May Hold Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 7.06. Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 7.07. Compensation and Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
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Page ---- Section 7.08. Corporate Trustee Required; Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Section 7.09. Resignation and Removal; Appointment of Successor . . . . . . . . . . . . . . . . . . . . . . . . 47 Section 7.10. Acceptance of Appointment by Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Section 7.11. Merger, Conversion, Consolidation or Succession to Business . . . . . . . . . . . . . . . . . . . 49 Section 7.12. Maintenance of Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Section 7.13. Money for Certificate Payments to Be Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . 51 Section 7.14. Registration of Equipment Notes in Trustee's Name . . . . . . . . . . . . . . . . . . . . . . . . 51 Section 7.15. Representations and Warranties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Section 7.16. Withholding Taxes; Information Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Section 7.17. Trustee's Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Section 7.18. Preferential Collection of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 ARTICLE VIII CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE Section 8.01. The Company to Furnish Trustee with Names and Addresses of Certificateholders . . . . . . . . . . 54 Section 8.02. Preservation of Information; Communications to Certificateholders . . . . . . . . . . . . . . . . 54 Section 8.03. Reports by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Section 8.04. Reports by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 ARTICLE IX SUPPLEMENTAL AGREEMENTS Section 9.01. Supplemental Agreements Without Consent of Certificateholders . . . . . . . . . . . . . . . . . . 55 Section 9.02. Supplemental Agreements with Consent of Certificateholders . . . . . . . . . . . . . . . . . . . . 57 Section 9.03. Documents Affecting Immunity or Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 9.04. Execution of Supplemental Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 9.05. Effect of Supplemental Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 9.06. Conformity with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Section 9.07. Reference in Certificates to Supplemental Agreements . . . . . . . . . . . . . . . . . . . . . . . 59 ARTICLE X AMENDMENTS TO INDENTURE AND NOTE DOCUMENTS Section 10.01. Amendments and Supplements to Indenture and Other Note Documents . . . . . . . . . . . . . . . . 59
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Page ---- ARTICLE XI TERMINATION OF TRUSTS Section 11.01. Termination of the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 ARTICLE XII MISCELLANEOUS PROVISIONS Section 12.01. Limitation on Rights of Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Section 12.02. Liabilities of Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Section 12.03. Registration of Equipment Notes in Name of Subordination Agent . . . . . . . . . . . . . . . . . 63 Section 12.04. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Section 12.05. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Section 12.06. Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Section 12.07. Trust Indenture Act Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.08. Effect of Headings and Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.09. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.10. Benefits of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.11. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.12. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.13. Communication by Certificateholders with Other Certificateholders . . . . . . . . . . . . . . . . 65 Section 12.14. Intention of Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Exhibit A - Form of Certificate Exhibit B - Form of Certificate for Unlegended Certificates Exhibit C - Form of Certificate To Be Delivered in Connection with Transfers Pursuant to Regulation S Exhibit D - Form of Certificate To Be Delivered in Connection with Transfers to Non-QIB Accredited Investors Exhibit E - Form of Assignment and Assumption Agreement
v 6 Reconciliation and tie between Atlas Air Pass Through Trust Agreement, dated as of February 9, 1998 and the Trust Indenture Act of 1939. This reconciliation does not constitute part of the Pass Through Trust Agreement.
Trust Indenture Act Pass Through Trust of 1939 Section Agreement Section - ------------------------------------------- --------------------------------- 310(a)(1) 7.07 (a)(2) 7.07 312(a) 3.05; 8.01; 8.02 313(a) 7.07 314(a) 8.04(a) - (c) (a)(4) 8.04(d) (c)(1) 1.02 (c)(2) 1.02 (d)(1) 7.13; 11.01 (d)(2) 7.13; 11.01 (d)(3) 2.01 (e) 1.02 315(b) 7.02 316(a)(last sentence) 1.01(c) (a)(1)(A) 6.04 (a)(1)(B) 6.05 (b) 6.06 (c) 1.04(d) 317(a)(1) 6.03 (b) 7.13 318(a) 12.05
vi 7 PASS THROUGH TRUST AGREEMENT This PASS THROUGH TRUST AGREEMENT, dated as of February 9, 1998 (as the same may be amended, supplemented or modified from time to time, this "Agreement"), between ATLAS AIR, INC., a Delaware corporation (the "Company"), and WILMINGTON TRUST COMPANY, a Delaware trust company, as Trustee, is made with respect to the formation of Atlas Air Pass Through Trust 1998-1C-O and the issuance of 8.01% Atlas Air 1998-1C-O Initial Pass Through Certificates representing fractional undivided interests in the Trust. W I T N E S S E T H: WHEREAS, the Company has obtained commitments from Boeing (such term and certain other capitalized terms used herein are defined below) for the delivery of certain Aircraft; WHEREAS, the Company intends to finance the acquisition of each such Aircraft either (i) through separate leveraged lease transactions, in which case the Company will lease such Aircraft (collectively, the "Leased Aircraft") or (ii) through separate secured loan transactions, in which case the Company will own such Aircraft (collectively, the "Owned Aircraft"); WHEREAS, in the case of each Leased Aircraft, each Owner Trustee, acting on behalf of the corresponding Owner Participant, will issue pursuant to an Indenture, on a non-recourse basis, Equipment Notes in order to finance a portion of its purchase price of such Leased Aircraft; WHEREAS, in the case of each Owned Aircraft, the Company will issue pursuant to an Indenture, on a recourse basis, Equipment Notes to finance a portion of the purchase price of such Owned Aircraft; WHEREAS, the Trustee hereby declares the creation of this Atlas Air Pass Through Trust 1998-1C (the "Trust") for the benefit of the Certificateholders, and the initial Certificateholders as the grantors of the Trust, by their respective acceptances of the Certificates, join in the creation of the Trust with the Trustee; WHEREAS, all Certificates to be issued by the Trust will evidence fractional undivided interests in the Trust and will convey no rights, benefits or interests in respect of any property other than the Trust Property except for those Certificates to which an Escrow Receipt has been affixed; WHEREAS, the Escrow Agent and the Placement Agents have contemporaneously herewith entered into an Escrow Agreement with the Escrow Paying Agent pursuant to which the Placement Agents have delivered to the Escrow Agent the 8 2 proceeds from the sale of the Certificates and have irrevocably instructed the Escrow Paying Agent to withdraw and pay funds from such proceeds upon request and proper certification by the Trustee to purchase Equipment Notes as the Aircraft are delivered by Boeing under the Aircraft Purchase Agreement from time to time prior to the Delivery Period Termination Date; WHEREAS, the Escrow Agent on behalf of the Certificateholders has contemporaneously herewith entered into a Deposit Agreement with the Depositary under which the Deposits referred to therein will be made and from which it will withdraw funds to allow the Trustee to purchase Equipment Notes from time to time prior to the Delivery Period Termination Date; WHEREAS, pursuant to the terms and conditions of this Agreement and the Note Purchase Agreement, upon or shortly following delivery of an Aircraft, the Trustee on behalf of the Trust, using funds withdrawn under the Escrow Agreement, shall purchase one or more Equipment Notes having the same interest rate as, and final maturity date not later than the final Regular Distribution Date of, the Certificates issued hereunder and shall hold such Equipment Notes in trust for the benefit of the Certificateholders; WHEREAS, to facilitate the sale of Equipment Notes to, and the purchase of Equipment Notes by, the Trustee on behalf of the Trust, the Company has duly authorized the execution and delivery of this Agreement as the "issuer", as such term is defined in and solely for purposes of the Securities Act, of the Certificates to be issued pursuant hereto and as the "obligor", as such term is defined in and solely for purposes of the Trust Indenture Act of 1939, as amended, with respect to all such Certificates and is undertaking to perform certain administrative and ministerial duties hereunder and is also undertaking to pay the ongoing fees and expenses of the Trustee; WHEREAS, all of the conditions and requirements necessary to make this Agreement, when duly executed and delivered, a valid, binding and legal instrument in accordance with its terms and for the purposes herein expressed, have been done, performed and fulfilled, and the execution and delivery of this Agreement in the form and with the terms hereof have been in all respects duly authorized; WHEREAS, upon issuance of the Exchange Certificates, if any, or the effectiveness of the Shelf Registration Statement, this Agreement as amended or supplemented from time to time, will be subject to the provisions of the Trust Indenture Act of 1939, as amended, and shall, to the extent applicable, be governed by such provisions; NOW, THEREFORE, in consideration of the mutual agreements herein contained, and of other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 9 3 ARTICLE I DEFINITIONS Section 1.01. Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms used herein that are defined in this Article I have the meanings assigned to them in this Article I, and include the plural as well as the singular; (b) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, or by the rules promulgated under the Trust Indenture Act, have the meanings assigned to them therein; (c) all references in this Agreement to designated "Articles", "Sections", "Subsections" and other subdivisions are to the designated Articles, Sections, Subsections and other subdivisions of this Agreement; (d) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section, Subsection or other subdivision; and (e) unless the context otherwise requires, whenever the words "including" "include" or "includes" are used herein, it shall be deemed to be followed by the phrase "without limitation". "Act" has the meaning, with respect to any Certificateholder, specified in Section 1.04(a). "Affiliate" means, with respect to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person. For the purposes of this definition, "control", when used with respect to any specified Person, means the power, directly or indirectly, to direct the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agent Members" has the meaning specified in Section 3.05(a). "Agreement" has the meaning specified in the recitals hereto. 10 4 "Aircraft" means each of the Aircraft or Substitute Aircraft in respect of which a Participation Agreement is entered into in accordance with the Note Purchase Agreement. "Applicable Delivery Date" has the meaning specified in Section 2.01(b). "Applicable Participation Agreement" has the meaning specified in Section 2.01(b). "Assignment and Assumption Agreement" means the assignment and assumption agreement substantially in the form of Exhibit E hereto executed and delivered in accordance with Section 11.01. "Authorized Agent" means, with respect to the Certificates, any Paying Agent or Registrar for the Certificates. "Avoidable Tax" has the meaning set forth in Section 7.09(e). "Boeing" means The Boeing Company. "Business Day" means, with respect to the Certificates, any day other than a Saturday, a Sunday or a day on which commercial banks are required or authorized to close in Denver, Colorado, New York, New York, Chicago, Illinois or, so long as any Certificate is outstanding, the city and state in which the Trustee or any related Loan Trustee maintains its Corporate Trust Office or receives and disburses funds. "Certificate" means any one of the Initial Certificates or Exchange Certificates and any such Certificates issued in exchange therefor or replacement thereof pursuant to this Agreement. "Certificate Account" means, with respect to the Certificates, the account or accounts created and maintained for such series pursuant to Section 4.01(a). "Certificateholder" or "Holder" means the Person in whose name a Certificate is registered in the Register for Certificates. "Clearing Agency" means an organization registered as a "clearing agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as amended. "Clearing Agency Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects, 11 5 directly or indirectly, book-entry transfers and pledges of securities deposited with the Clearing Agency. "Company" means Atlas Air, Inc., a Delaware corporation, or its successor in interest pursuant to Section 5.02, or (only in the context of provisions hereof, if any, when such reference is required for purposes of compliance with the Trust Indenture Act) any other "obligor" (within the meaning of the Trust Indenture Act) with respect to the Certificates. "Controlling Party" means the Person entitled to act as such pursuant to the terms of the Intercreditor Agreement. "Corporate Trust Office" means, with respect to the Trustee or any Loan Trustee, the office of such trustee in the city at which at any particular time its corporate trust business shall be principally administered. "Cut-off Date" means the earlier of (a) the Delivery Period Termination Date and (b) the date on which a Triggering Event occurs. "Delivery Period Termination Date" means June 30, 1999; provided, that if a labor strike or work stoppage occurs at The Boeing Company prior to such date, such date shall be extended by adding thereto the number of days that each such labor strike or work stoppage continues in effect. "Direction" has the meaning specified in Section 1.04(a). "Equipment Notes" means all of the equipment notes issued under the Indentures. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor federal statute. "Escrow Account" has the meaning specified in Section 2.02(b). "Escrow Agent" means, initially, First Security, National Association, and any replacement or successor therefor appointed in accordance with the Escrow Agreement. "Escrow Agreement" means the Escrow and Paying Agent Agreement dated as of February 9, 1998 relating to the Certificates, among the Escrow Agent, the Escrow Paying Agent, the Trustee and Placement Agents, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. 12 6 "Escrow Paying Agent" means the Person acting as paying agent under the Escrow Agreement. "Escrow Receipt" means the receipt substantially in the form annexed to the Escrow Agreement representing a fractional undivided interest in the funds held in escrow thereunder. "Escrowed Funds" has the meaning specified in Section 2.02(b). "Event of Default" means an Indenture Event of Default under any Indenture pursuant to which Equipment Notes held by such Trust were issued. "Exchange Certificates" means the certificates substantially in the form of Exhibit A hereto issued in exchange for the Certificates pursuant to the Registration Rights Agreement and authenticated hereunder. "Final Withdrawal Notice" has the meaning specified in Section 2.02. "Fractional Undivided Interest" means the fractional undivided interest in a Trust that is evidenced by a Certificate. "Global Certificates" has the meaning specified in Section 3.01(d). "Indenture" means each of the separate trust indentures and mortgages relating to the Aircraft, each as specified or described in a Delivery Notice delivered pursuant to the Note Purchase Agreement or the related Participation Agreement, in each case as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Indenture Event of Default" means, with respect to any Indenture, any Indenture Event of Default (as such term is defined in such Indenture). "Initial Regular Distribution Date" means, with respect to the Certificates, the first Regular Distribution Date on which a Scheduled Payment is to be made. "Institutional Accredited Investor" means an institutional investor that is an "accredited investor" within the meaning set forth in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act. "Intercreditor Agreement" means the Intercreditor Agreement dated as of February 9, 1998 among the Trustee, the Other Trustees, the Liquidity Providers, the liquidity providers relating to the Certificates issued under (and as defined in) each of 13 7 the Other Pass Through Trust Agreements, and Wilmington Trust Company, as Subordination Agent and as trustee thereunder, as amended, supplemented or otherwise modified from time to time in accordance with its terms. "Issuance Date" means, with respect to the Certificates, the date of the issuance of such Certificates. "Investors" means the Placement Agents together with all subsequent beneficial owners of the Certificates. "Lease" means, with respect to each Leased Aircraft, any lease between an Owner Trustee, as the lessor, and the Company, as the lessee, referred to in the related Indenture, as such lease may be amended, supplemented or otherwise modified in accordance with its terms; and "Leases" means all such Leases. "Leased Aircraft" has the meaning specified in the recitals hereto. "Leased Aircraft Participation Agreement" means any participation agreement substantially in the form of Exhibit A-1 to the Note Purchase Agreement, as the same may be amended, supplemented or otherwise modified in accordance with its terms. "Letter of Representations" means, with respect to the Certificates, an agreement among the Company, the Trustee and the initial Clearing Agency. "Liquidity Facility" means, with respect to the Certificates, any revolving credit agreement, letter of credit or similar facility relating to the Certificates between a bank or other financial institution and a Subordination Agent, as amended, replaced, supplemented or otherwise modified from time to time in accordance with its terms and the terms of any Intercreditor Agreement. "Liquidity Provider" means, with respect to the Certificates, a bank or other financial institution that agrees to provide a Liquidity Facility for the benefit of the holders of Certificates. "Loan Trustee" means, with respect to any Equipment Note or the Indenture applicable thereto, the bank or trust company designated as loan or indenture trustee under such Indenture, and any successor to such Loan Trustee as such trustee; and "Loan Trustees" means all of the Loan Trustees under the Indentures. "Non-U.S. Person" means a Person that is not a "U.S. person", as defined in Regulation S. 14 8 "Note Documents" means, with respect to the Certificates, the Equipment Notes with respect to such Certificates and, with respect to such Equipment Notes, the related Indenture, Note Purchase Agreement and, if the related Aircraft is leased to the Company, the related Lease and the related Owner Trustee's Purchase Agreement. "Note Purchase Agreement" means, with respect to the Certificates, any note purchase, refunding, participation or similar agreement providing for, among other things, the purchase of Equipment Notes by the Trustee on behalf of the relevant Trust; and "Note Purchase Agreements" means all such agreements. "Offering Memorandum" means the Offering Memorandum dated January 27, 1998 relating to the offering of the Certificates and the certificates offered under the Other Pass Through Trust Agreements. "Officer's Certificate" means a certificate signed, (a) in the case of the Company, by the Chairman or Vice Chairman of the Board of Directors, the President, any Vice President or the Treasurer of the Company, signing alone, or (b) in the case of the Trustee or an Owner Trustee or a Loan Trustee, a Responsible Officer of the Trustee or such Owner Trustee or such Loan Trustee, as the case may be. "Offshore Certificates Exchange Date" has the meaning specified in Section 3.01(d). "Offshore Global Certificates" has the meaning specified in Section 3.01(d). "Offshore Physical Certificates" has the meaning specified in Section 3.01(e). "Opinion of Counsel" means a written opinion of legal counsel who (a) in the case of counsel for the Company may be (i) a senior attorney of the Company one of whose principal duties is furnishing advice as to legal matters, (ii) Cahill Gordon & Reindel or (iii) such other counsel designated by the Company and reasonably acceptable to the Trustee and (b) in the case of any Owner Trustee or any Loan Trustee, may be such counsel as may be designated by any of them whether or not such counsel is an employee of any of them, and who shall be reasonably acceptable to the Trustee. "Other Pass Through Trust Agreements" means each of the two other Atlas Air 1998-1 Pass Through Trust Agreements relating to Atlas Air Pass Through Trust, Series 1998-1A-O and Atlas Air Pass Through Trust, Series 1998-1B-O, dated the date hereof. 15 9 "Other Trustees" means the trustees under the Other Pass Through Trust Agreements, and any successor or other trustee appointed as provided therein. "Other Trusts" means the Atlas Air Pass Through Trust 1998-1A-O and the Atlas Air Pass Through Trust 1998-1B-O, each created on the date hereof. "Outstanding" when used with respect to Certificates, means, as of the date of determination, all Certificates theretofore authenticated and delivered under this Agreement, except: (a) Certificates theretofore cancelled by the Registrar or delivered to the Trustee or the Registrar for cancellation; (b) All of the Certificates if money in the full amount required to make the final distribution with respect to such series pursuant to Section 11.01 hereof has been theretofore deposited with the Trustee in trust for the Holders of the Certificates as provided in Section 4.01 pending distribution of such money to such Certificateholders pursuant to payment of such final distribution payment; and (c) Certificates in exchange for or in lieu of which other Certificates have been authenticated and delivered pursuant to this Agreement. "Owned Aircraft" has the meaning specified in the recitals hereto. "Owned Aircraft Participation Agreement" means any participation agreement substantially in the form of Exhibit C-1 to the Note Purchase Agreement, as the same may be amended, supplemented or otherwise modified in accordance with its terms. "Owner Trustee's Purchase Agreement" has the meaning, with respect to the Certificates if the related Aircraft is leased to the Company, specified therefor in the related Lease. "Participation Agreement" means, collectively, the Leased Aircraft Participation Agreement and the Owned Aircraft Participation Agreement. "Paying Agent" means, with respect to the Certificates, the paying agent maintained and appointed for the Certificates pursuant to Section 7.12. "Permanent Offshore Global Certificates" has the meaning specified in Section 3.01(d). 16 10 "Permitted Investments" means obligations of the United States of America or agencies or instrumentalities thereof for the payment of which the full faith and credit of the United States of America is pledged, maturing in not more than 60 days after the date of acquisition thereof or such lesser time as is required for the distribution of any Special Payments on a Special Distribution Date. "Person" means any person, including any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, trustee, unincorporated organization, or government or any agency or political subdivision thereof. "Physical Certificates" has the meaning specified in Section 3.01. "Placement Agents" means Morgan Stanley & Co. Incorporated, BT Alex. Brown Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co. "Placement Agreement" means the Placement Agreement dated January 27, 1998 among the Placement Agents and the Company, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Pool Balance" means, as of any date, (i) the original aggregate face amount of the Certificates less (ii) the aggregate amount of all payments made in respect of the Certificates other than payments made in respect of interest or premium thereon or reimbursement of any costs or expenses incurred in connection therewith. The Pool Balance as of any Distribution Date shall be computed after giving effect to the payment of principal, if any, on the Equipment Notes or other Trust Property held in the Trust and the distribution thereof to be made on such Distribution Date. "Pool Factor" means, as of any date, the quotient (rounded to the seventh decimal place) computed by dividing (i) the Pool Balance of such series as at such date by (ii) the original aggregate face amount of the Certificates. The Pool Factor as of any Distribution Date shall be computed after giving effect to the payment of principal, if any, on the Equipment Notes or other Trust Property held in the Trust and the distribution thereof to be made on such Distribution Date. "Potential Purchaser" has the meaning, with respect to any Certificateholder, specified in Section 6.01(b). "Private Placement Legend" has the meaning specified in Section 3.02(a). 17 11 "PTC Event of Default" means, with respect to the Certificates, any failure to pay within ten Business Days of the due date thereof: (i) the outstanding Pool Balance of such series of Certificates on the date specified in any Trust Supplement for such payment or (ii) interest due on the Certificates on any Distribution Date (unless the related Subordination Agent shall have made an Interest Drawing or Drawings (as defined in the related Intercreditor Agreement), or a withdrawal or withdrawals pursuant to a cash collateral account under such Intercreditor Agreement, with respect thereto in an aggregate amount sufficient to pay such interest and shall have distributed such amount to the Trustee). "Purchasing Certificateholder" has the meaning, with respect to any Certificateholder, specified in Section 6.01(b). "QIB" means a qualified institutional buyer as defined in Rule 144A. "Record Date" means, with respect to any Trust or the related series of Certificates, (i) for Scheduled Payments to be distributed on any Regular Distribution Date, other than the final distribution with respect to such series, the 15th day (whether or not a Business Day) preceding such Regular Distribution Date, and (ii) for Special Payments to be distributed on any Special Distribution Date, other than the final distribution with respect to such series, the 15th day (whether or not a Business Day) preceding such Special Distribution Date. "Register" and "Registrar" means, each with respect to the Certificates, the register maintained and the registrar appointed pursuant to Sections 3.04 and 7.12. "Registration Event" has the meaning set forth in the Placement Agreement. "Registration Rights Agreement" means the Registration Rights Agreement dated February 9, 1998, among the Placement Agents, the Trustee, the Other Trustees and the Company, as amended, supplemented or otherwise modified from time to time in accordance with its terms. "Registration Statement" means the Registration Statement defined in the Registration Rights Agreement. "Regular Distribution Date" means, with respect to distributions of Scheduled Payments in respect of any series of Certificates, each date designated as such in this Agreement, until payment of all the Scheduled Payments to be made under the Equipment Notes held in the Trust have been made. 18 12 "Regulation S" means Regulation S under the Securities Act or any successor regulation thereto. "Related Pass Through Trust Agreement" means the Atlas Air 1998-1C-S Pass Through Trust Agreement relating to the Atlas Air Pass Through Trust 1998-1C-S and entered into by the Company and the Trustee, which agreement becomes effective upon the execution and delivery of the Assignment and Assumption Agreement pursuant to Section 11.01. "Related Trust" means the Atlas Pass Through Trust 1998-1C-S, to be formed under the Related Pass Through Trust Agreement. "Related Trustee" means the trustee under the Related Pass Through Trust Agreement. "Request" means a request by the Company setting forth the subject matter of the request accompanied by an Officer's Certificate and an Opinion of Counsel as provided in Section 1.02 of this Agreement. "Responsible Officer" means, with respect to any Trustee, any Loan Trustee and any Owner Trustee, any officer in the Corporate Trust Department of the Trustee, Loan Trustee or Owner Trustee or any other officer customarily performing functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of his knowledge of and familiarity with a particular subject. "Responsible Party" means, with respect to the Certificates, the person designated as such in the related Trust Supplement. "Rule 144A" means Rule 144A under the Securities Act and any successor rule thereto. "Scheduled Payment" means, with respect to any Equipment Note, (i) any payment of principal or interest on such Equipment Note (other than any such payment which is not in fact received by the Trustee or any Subordination Agent within five days of the date on which such payment is scheduled to be made) or (ii) any payment of interest on the Certificates with funds drawn under the Liquidity Facility for such series, which payment represents the installment of principal on such Equipment Note at the stated maturity of such installment, the payment of regularly scheduled interest accrued on the unpaid principal amount of such Equipment Note, or both; provided, however, that any payment of principal, premium, if any, or interest 19 13 resulting from the redemption or purchase of any Equipment Note shall not constitute a Scheduled Payment. "SEC" means the Securities and Exchange Commission, as from time to time constituted or created under the Securities Exchange Act of 1934, as amended, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties on such date. "Selling Certificateholder" has the meaning, with respect to any Certificateholder, specified in Section 6.01(b). "Shelf Registration Statement" has the meaning set forth in the Registration Rights Agreement. "Special Distribution Date" means, with respect to the Certificates, each date on which a Special Payment is to be distributed as specified in this Agreement. "Special Payment" means (i) any payment (other than a Scheduled Payment) in respect of, or any proceeds of, any Equipment Note or Trust Indenture Estate (as defined in each Indenture) or Special Redemption Premium, (ii) the amounts required to be distributed pursuant to the last paragraph of Section 2.02(b) or (iii) the amounts required to be distributed pursuant to the penultimate paragraph of Section 2.02(b). "Special Payments Account" means, with respect to the Certificates, the account or accounts created and maintained for such series pursuant to Section 4.01(b) and the related Trust Supplement. "Special Redemption Premium" means the premium payable by the Company in respect of the Final Withdrawal pursuant to the Note Purchase Agreement. "Specified Investments" means, with respect to any Trust, (i) obligations of, or guaranteed by, the United States Government or agencies thereof, (ii) open market commercial paper of any corporation incorporated under the laws of the United States of America or any state thereof rated at least P-2 or its equivalent by Moody's Investors Service, Inc. or at least A-2 or its equivalent by Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., (iii) certificates of deposit issued by commercial banks organized under the laws of the United States or of any political subdivision thereof having a combined capital and surplus in excess of $100,000,000 which banks or their holding companies have a rating of A or its equivalent by Moody's Investors Service, Inc. or Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc.; provided, however, that the 20 14 aggregate amount at any one time so invested in certificates of deposit issued by any one bank shall not exceed 5% of such bank's capital and surplus, (iv) U.S. dollar-denominated offshore certificates of deposit issued by, or offshore time deposits with, any commercial bank described in clause (iii) above or any subsidiary thereof and (v) repurchase agreements with any financial institution having combined capital and surplus of at least $100,000,000 with any of the obligations described in clauses (i) through (iv) above as collateral; provided furtherthat if all of the above investments are unavailable, the entire amounts to be invested may be used to purchase federal funds from an entity described in clause (iii) above. "Subordination Agent" has the meaning specified therefor in the Intercreditor Agreement. "Substitute Aircraft" has the meaning specified in the Note Purchase Agreement. "Temporary Offshore Global Certificates" has the meaning specified in Section 3.01(d). "Transfer Date" has the meaning specified in Section 11.01. "Triggering Event" has the meaning specified therefor in the Intercreditor Agreement. "Trust" means the trust under this Agreement. "Trustee" means Wilmington Trust Company, or its successor in interest, and any successor or other trustee appointed as provided herein. "Trustee's Liens" has the meaning specified in Section 7.17. "Trust Indenture Act", except as otherwise provided in Section 9.06, means, with respect to any particular Trust, the United States Trust Indenture Act of 1939, as in force at the date as of which the related Trust Supplement was executed. "Trust Property" means (i) subject to the Intercreditor Agreement, the Equipment Notes held as the property of the Trust, all monies at any time paid thereon and all monies due and to become due thereunder, (ii) funds from time to time deposited in the Escrow Account, the Certificate Account and the Special Payments Account and, subject to the Intercreditor Agreement, any proceeds from the sale by the Trustee pursuant to Article VI hereof of any such Equipment Note, (iii) all rights of the Trust and the Trustee, on behalf of the Trust, under the Intercreditor 21 15 Agreement, the Escrow Agreement, the Note Purchase Agreement and the Liquidity Facilities, including, without limitation, all rights to receive certain payments thereunder, and all monies paid to the Trustee on behalf of the Trust pursuant to the Intercreditor Agreement or the Liquidity Facilities, provided that rights with respect to the Deposits or under the Escrow Agreement, except for the right to direct withdrawals for the purchase of Equipment Notes to be held herein, will not constitute Trust Property. "U.S. Global Certificate" has the meaning specified in Section 3.01(c). "U.S. Physical Certificates" has the meaning specified in Section 3.01(e). "8.01 % 1998-1C Initial Pass Through Certificates" has the meaning specified in Section 3.01(a). "8.01% 1998-1C Exchange Pass Through Certificates" has the meaning specified in Section 3.01(a). Section 1.02. Compliance Certificates and Opinions. Upon any application or request by the Company, any Owner Trustee or any Loan Trustee to the Trustee to take any action under any provision of this Agreement, the Company, such Owner Trustee or such Loan Trustee, as the case may be, shall furnish to the Trustee (i) an Officer's Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Agreement relating to the proposed action have been complied with and (ii) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Agreement relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Agreement (other than a certificate provided pursuant to Section 8.04(d)) shall include: (a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions in this Agreement relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; 22 16 (c) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. Section 1.03. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters and any such Person may certify or give an opinion as to such matters in one or several documents. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Agreement, they may, but need not, be consolidated and form one instrument. Section 1.04. Directions of Certificateholders. (a) Any direction, consent, request, demand, authorization, notice, waiver or other action provided by this Agreement in respect of the Certificates to be given or taken by Certificateholders (a "Direction") may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Certificateholders in person or by an agent or proxy duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, when it is hereby expressly required pursuant to this Agreement, to the Company or any Loan Trustee. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Certificateholders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent or proxy shall be sufficient for any purpose of this Trust Agreement and conclusive in favor of the Trustee, the Company and the related Loan Trustee, if made in the manner provided in this Section 1.04. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the certificate of any notary public or other officer of any jurisdiction authorized to take acknowledgments of deeds or administer oaths that the Person executing such instrument acknowledged to him the execution thereof, or by an affidavit of a witness to such execution sworn to before any such notary or such other officer, and where such execution is by an officer of a corporation or association or a member of a partnership, on behalf of such corporation, association or partnership, such 23 17 certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other reasonable manner which the Trustee deems sufficient. (c) In determining whether the Certificateholders of the requisite Fractional Undivided Interests of Certificates Outstanding have given any Direction under this Agreement, Certificates owned by the Company or any Affiliate thereof shall be disregarded and deemed not to be Outstanding for purposes of any such determination. In determining whether the Trustee shall be protected in relying upon any such Direction, only Certificates which the Trustee knows to be so owned shall be so disregarded. Notwithstanding the foregoing, (i) if any such Person owns 100% of the Certificates Outstanding, such Certificates shall not be so disregarded, and (ii) if any amount of Certificates so owned by any such Person have been pledged in good faith, such Certificates shall not be disregarded if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Certificates and that the pledgee is not the Company or any Affiliate thereof. (d) The Company may, at its option, by delivery of an Officer's Certificate to the Trustee, set a record date to determine the Certificateholders in respect of the Certificates, entitled to give any Direction. Notwithstanding Section 316(c) of the Trust Indenture Act, such record date shall be the record date specified in such Officer's Certificate, which shall be a date not more than 30 days prior to the first solicitation of Certificateholders of the applicable series in connection therewith. If such a record date is fixed, such Direction may be given before or after such record date, but only the Certificateholders of record of the applicable series at the close of business on such record date shall be deemed to be Certificateholders for the purposes of determining whether Certificateholders of the requisite proportion of Outstanding Certificates have authorized or agreed or consented to such Direction, and for that purpose the Outstanding Certificates shall be computed as of such record date; provided, however, that no such Direction by the Certificateholders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Agreement not later than one year after such record date. (e) Any Direction by the Holder of any Certificate shall bind the Holder of every Certificate issued upon the transfer thereof or in exchange therefor or in lieu thereof, whether or not notation of such Direction is made upon such Certificate. (f) Except as otherwise provided in Section 1.04(c), Certificates owned by or pledged to any Person shall have an equal and proportionate benefit under the provisions of this Agreement, without preference, priority or distinction as among all of the Certificates. 24 18 ARTICLE II ORIGINAL ISSUANCE OF CERTIFICATES: ACQUISITION OF TRUST PROPERTY Section 2.01. Delivery of Documents; Delivery Dates. (a) The Trustee is hereby directed (i) to execute and deliver the Intercreditor Agreement, the Escrow Agreement and the Note Purchase Agreement on or prior to the Issuance Date, each in the form delivered to the Trustee by the Company and (ii) subject to the respective terms thereof, to perform its obligations thereunder. Upon request of the Company and the satisfaction or waiver of the closing conditions specified in the Placement Agreement, the Trustee shall execute, deliver, authenticate, issue and sell Certificates in authorized denominations equaling in the aggregate the amount set forth, with respect to the Trust, in Schedule II to the Placement Agreement evidencing the entire ownership interest in the Trust, which amount equals the maximum aggregate principal amount of Equipment Notes which may be purchased by the Trustee pursuant to the Note Purchase Agreement. Except as provided in Sections 3.04 and 3.07 of this Agreement, the Trustee shall not execute, authenticate or deliver Certificates in excess of the aggregate amount specified in this paragraph. (b) On or after the Issuance Date, the Company may deliver from time to time to the Trustee a Delivery Notice relating to one or more Equipment Notes. After receipt of a Delivery Notice and in any case no later than one Business Day prior to a Delivery Date as to which such Delivery Notice relates (the "Applicable Delivery Date"), the Trustee shall (as and when specified in the Delivery Notice) instruct the Escrow Agent to provide a Notice of Purchase Withdrawal to the Depositary requesting (A) the withdrawal of one or more Deposits on the Applicable Delivery Date in accordance with and to the extent permitted by the terms of the Escrow Agreement and the Deposit Agreement and (B) the payment of all, or a portion, of such Deposit or Deposits in an amount equal in the aggregate to the purchase price of such Equipment Notes to or on behalf of the Owner Trustee or the Company, as the case may be, issuing such Equipment Notes, all as shall be described in the Delivery Notice. The Trustee shall (as and when specified in such Delivery Notice), subject to the conditions set forth in Section 2 of the Note Purchase Agreement, enter into and perform its obligations under the Participation Agreement specified in such Delivery Notice (the "Applicable Participation Agreement") and cause such certificates, documents and legal opinions relating to the Trustee to be duly delivered as required by the Applicable Participation Agreement. If at any time prior to the Applicable Delivery Date, the Trustee receives a notice of postponement pursuant to Section 1(e) or 1(f) of the Note Purchase Agreement, then the Trustee shall give the Depositary (with a copy to the Escrow Agent) a notice of cancellation of such Notice of Purchase Withdrawal relating to such Deposit or Deposits on such Applicable Delivery Date. Upon satisfaction of the conditions specified in the Note Purchase Agreement and the Applicable Participation Agreement, the Trustee shall 25 19 purchase the applicable Equipment Notes with the proceeds of the withdrawals of one or more Deposits made on the Applicable Delivery Date in accordance with the terms of the Deposit Agreement and the Escrow Agreement. The purchase price of such Equipment Notes shall equal the principal amount of such Equipment Notes. Amounts withdrawn from such Deposit or Deposits in excess of the purchase price of the Equipment Notes or to the extent not applied on the Applicable Delivery Date to the purchase price of the Equipment Notes, shall be re-deposited by the Trustee with the Depositary on the Applicable Delivery Date in accordance with the terms of the Deposit Agreement. Section 2.02. Withdrawal of Deposits. If any Deposits remain outstanding on the Business Day next succeeding the Cut-off Date, (i) the Trustee shall give the Escrow Agent notice that the Trustee's obligation to purchase Equipment Notes under the Note Purchase Agreement has terminated and instruct the Escrow Agent to provide a notice of Final Withdrawal to the Depositary substantially in the form of Exhibit B to the Deposit Agreement (the "Final Withdrawal Notice") and (ii) the Trustee will make a demand upon the Company under the Note Purchase Agreement for an amount equal to the Special Redemption Premium, such payment to be made on the Final Withdrawal Date. Section 2.03. Acceptance by Trustee. The Trustee, upon the execution and delivery of this Agreement, acknowledges its acceptance of all right, title and interest in and to the Trust Property and will hold such right, title and interest for the benefit of all then present and future Certificateholders, upon the trusts herein set forth. By its payment for and acceptance of each Certificate issued to it under this Agreement, each initial Holder of such Certificate as grantor of such Trust shall thereby join in the creation and declaration of such Trust. Section 2.04. Limitation of Powers. The Trust is constituted solely for the purpose of making the investment in the Equipment Notes, and, except as set forth herein, the Trustee shall not be authorized or empowered to acquire any other investments or engage in any other activities and, in particular, the Trustee shall not be authorized or empowered to do anything that would cause such Trust to fail to qualify as a "grantor trust" for federal income tax purposes (including, as subject to this restriction, acquiring any Aircraft (as defined in the respective Indentures) by bidding such Equipment Notes or otherwise, or taking any action with respect to any such Aircraft once acquired). 26 20 ARTICLE III THE CERTIFICATES Section 3.01. Title, Form, Denomination and Execution of Certificates. (a) The Initial Certificates shall be known as the "8.01% 1998-1C-O Initial Pass Through Certificates" and the Exchange Certificates shall be known as the "8.01% 1998-1C-O Exchange Pass Through Certificates", in each case, of the Trust. Each Certificate will represent a fractional undivided interest in the Trust and shall be substantially in the form set forth as Exhibit A hereto, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Agreement and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Certificates, as evidenced by their execution of the Certificates. Any portion of the text of any Certificate may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Certificate. (b) The Initial Certificates shall be issued only in fully registered form without coupons and only in denominations of $100,000 or integral multiples of $1,000 in excess thereof, except that one Certificate may be issued in a denomination of less than $100,000. The Exchange Certificates will be issued in denominations of $1,000 or integral multiples thereof. Each Certificate shall be dated the date of its authentication. The aggregate Fractional Undivided Interest of Certificates shall not at any time exceed $300,254,000. (c) Initial Certificates offered and sold in reliance on Rule 144A shall be issued initially in the form of a single permanent global Certificate in registered form, substantially in the form set forth as Exhibit A hereto (the "U.S. Global Certificate"), duly executed and authenticated by the Trustee as hereinafter provided. The U.S. Global Certificate will be registered in the name of a nominee for the Depositary and deposited with the Trustee, as custodian for the Depositary. The aggregate principal amount of the U.S. Global Certificate may from time to time be increased or decreased by adjustments made on the records of the Depositary or its nominee, or of the Trustee, as custodian for the Depositary or its nominee, as hereinafter provided. (d) Initial Certificates offered and sold in offshore transactions in reliance on Regulation S shall be issued initially in the form of a single temporary global Certificate in registered form, substantially in the form set forth as Exhibit A hereto (the "Temporary Offshore Global Certificate") duly executed and authenticated by the Trustee as hereinafter provided. The Temporary Offshore Global Certificates will be registered in the name of a nominee of the Depositary for credit to the account of the Agent Members acting as depositaries for Euroclear and Cedel and deposited with the Trustee as custodian for the 27 21 Depositary. At any time following March 21, 1998 (the "Offshore Certificates Exchange Date"), upon receipt by the Trustee of a certificate substantially in the form of Exhibit B hereto, a single permanent global Certificate in registered form substantially in the form set forth in Exhibit A (the "Permanent Offshore Global Certificate"; and together with the Temporary Offshore Global Certificate, the "Offshore Global Certificates"), duly executed and authenticated by the Trustee as hereinafter provided, shall be registered in the name of a nominee for the Depositary and deposited with the Trustee, as custodian for the Depositary, and the Registrar shall reflect on its books and records the date of such transfer and a decrease in the principal amount of any Temporary Offshore Global Certificate in an amount equal to the principal amount of the beneficial interest in such Temporary Offshore Global Certificate transferred. The U.S. Global Certificate and the Offshore Global Certificates are sometimes referred to as the "Global Certificates". (e) Initial Certificates offered and sold to Institutional Accredited Investors shall be issued in the form of permanent certificated Certificates in registered form in substantially the form set forth as Exhibit A hereto (the "U.S. Physical Certificates"). Certificates issued pursuant to Section 3.05(b) in exchange for interests in any Offshore Global Certificate shall be in the form of permanent certificated Certificates in registered form substantially in the form set forth in Exhibit A (the "Offshore Physical Certificates"). The Offshore Physical Certificates and U.S. Physical Certificates are sometimes collectively herein referred to as the "Physical Certificates". (f) The Exchange Certificates shall be issued in the form of one or more global Certificates substantially in the form of Exhibit A hereto (each, a "Global Exchange Certificate"), except that (i) the Private Placement Legend (hereinafter defined) shall be omitted and (ii) such Exchange Certificates shall contain such appropriate insertions, omissions, substitutions and other variations from the form set forth in Exhibit A hereto relating to the nature of the Exchange Certificates as the Responsible Officer of the Trustee executing such Exchange Certificates on behalf of the Trust may determine, as evidenced by such officer's execution on behalf of the Trust of such Exchange Certificates. Such Global Exchange Certificates shall be in registered form and be registered in the name of DTC and deposited with the Trustee, at its Corporate Trust Office, as custodian for DTC. The aggregate principal amount of any Global Exchange Certificate may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC for such Global Exchange Certificate, which adjustments shall be conclusive as to the aggregate principal amount of any such Global Exchange Certificate. Subject to clause (i) and (ii) of the first sentence of this Section 3.01(f), the terms hereof applicable to Restricted Global Certificates and/or Global Certificates shall apply to the Global Exchange Certificates, mutatis mutandis. (g) The definitive Certificates shall be in registered form and shall be typed, printed, lithographed or engraved or produced by any combination of these methods 28 22 or may be produced in any other manner, all as determined by the officers executing such Certificates, as evidenced by their execution of such Certificates. Section 3.02. Restrictive Legends. (a) Subject to Section 3.06, unless and until (i) an Initial Certificate is sold under an effective Registration Statement or (ii) an Initial Certificate is exchanged for an Exchange Certificate pursuant to an effective Exchange Offer Registration Statement, in each case as provided for in the Registration Rights Agreement, each Global Certificate (other than the Permanent Offshore Global Certificate) and each U.S. Physical Certificate shall bear the following legend (the "Private Placement Legend") on the face thereof: THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS CERTIFICATE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT; (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFICATE WAS HELD BY ATLAS AIR, INC., THE TRUSTEE OR ANY AFFILIATE OF ANY OF SUCH PERSONS RESELL OR OTHERWISE TRANSFER THIS CERTIFICATE EXCEPT (A) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (B) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING $100,000 OR MORE AGGREGATE PRINCIPAL AMOUNT OF SUCH CERTIFICATE THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS CERTIFICATE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (E) PURSUANT TO AN 29 23 EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT; AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS CERTIFICATE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS CERTIFICATE WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFICATE WAS HELD BY ATLAS AIR, INC., THE TRUSTEE OR ANY AFFILIATE OF ANY OF SUCH PERSONS THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE PASS THROUGH TRUST AGREEMENT CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS CERTIFICATE IN VIOLATION OF THE FOREGOING RESTRICTIONS. (b) Each Global Certificate shall also bear the following legend on the face thereof: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE PASS THROUGH TRUST AGREEMENT REFERRED TO HEREIN. 30 24 Section 3.03. Authentication of Certificates. (a) On the Issuance Date, the Trustee shall duly execute, authenticate and deliver Certificates in authorized denominations equalling in the aggregate the amount set forth, with respect to the Trust, in Schedule II to the Placement Agreement, evidencing the entire ownership of the Trust, which amount equals the maximum aggregate principal amount of the Equipment Notes which may be purchased by the Trustee pursuant to the Note Purchase Agreement. (b) No Certificate shall be entitled to any benefit under this Agreement or be valid or obligatory for any purpose, unless there appears on such Certificate a certificate of authentication substantially in the form provided for herein executed by the Trustee by the manual signature of one of its authorized signatories, and such certificate upon any Certificate shall be conclusive evidence, and the only evidence, that such Certificate has been duly authenticated and delivered hereunder. Section 3.04. Transfer and Exchange. The Trustee shall cause to be kept at the office or agency to be maintained by it in accordance with the provisions of Section 7.12 of this Agreement a register (the "Register") for the Certificates in which, subject to such reasonable regulations as it may prescribe, the Trustee shall provide for the registration of the Certificates and of transfers and exchanges of the Certificates as herein provided. The Trustee shall initially be the registrar (the "Registrar") for the purpose of registering the Certificates and transfers and exchanges of the Certificates as herein provided. A Certificateholder may transfer a Certificate by written application to the Registrar stating the name of the proposed transferee and otherwise complying with the terms of this Agreement, including providing a written certificate or other evidence of compliance with any restrictions on transfer. No such transfer shall be effected until, and such transferee shall succeed to the rights of a Certificateholder only upon, final acceptance and registration of the transfer by the Registrar in the Register. Prior to the registration of any transfer by a Certificateholder as provided herein, the Trustee shall treat the person in whose name the Certificate is registered as the owner thereof for all purposes, and the Trustee shall not be affected by notice to the contrary. Furthermore, the Depositary shall, by acceptance of a Global Certificate, agree that transfers of beneficial interests in such Global Certificate may be effected only through a book-entry system maintained by the Depositary (or its agent), and that ownership of a beneficial interest in the Certificate shall be required to be reflected in a book entry. When Certificates are presented to the Registrar with a request to register the transfer or to exchange them for an equal face amount of Certificates of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its requirements for such transactions are met. To permit registrations of transfers and exchanges in accordance with the terms, conditions and restrictions hereof, the Trustee shall execute and authenticate Certificates at the Registrar's request. No service charge shall be made for any registration of transfer or exchange of the Certificates, but the Trustee may require payment by the transferor of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or 31 25 other similar governmental charges payable upon exchanges pursuant to Section 3.10 or 9.07). Section 3.05. Book-Entry Provisions for U.S. Global Certificate and Offshore Global Certificates. (a) Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Agreement with respect to any Global Certificate held on their behalf by the Depositary, or the Trustee as its custodian, and the Depositary may be treated by the Trustee and any agent of the Trustee as the absolute owner of such Global Certificate for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Trustee or any agent of the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or shall impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a holder of any Certificate. Upon the issuance of any Global Certificate, the Registrar or its duly appointed agent shall record a nominee of the Depositary as the registered holder of such Global Certificate. (b) Transfers of any Global Certificate shall be limited to transfers of such Global Certificate or Offshore Global Certificate in whole, but not in part, to nominees of the Depositary, its successor or such successor's nominees. Beneficial interests in the U.S. Global Certificate and any Offshore Global Certificate may be transferred in accordance with the rules and procedures of the Depositary and the provisions of Section 3.06. Beneficial interests in the U.S. Global Certificate or an Offshore Global Certificate shall be delivered to all beneficial owners in the form of U.S. Physical Certificates or Offshore Physical Certificates, as the case may be, if (i) the Depositary notifies the Trustee that it is unwilling or unable to continue as Depositary for the U.S. Global Certificate or such Offshore Global Certificate, as the case may be, and a successor depositary is not appointed by the Trustee within 90 days of such notice or (ii) an Event of Default has occurred and is continuing and the Registrar has received a request from the Depositary to issue Physical Certificates. (c) Any beneficial interest in one of the Global Certificates that is transferred to a Person who takes delivery in the form of an interest in the other Global Certificate will, upon such transfer, cease to be an interest in such Global Certificate and become an interest in the other Global Certificate and, accordingly, will thereafter be subject to all transfer restrictions, if any, and other procedures applicable to beneficial interests in such other Global Certificate for as long as it remains such an interest. (d) In connection with the transfer of the entire U.S. Global Certificate or an entire Offshore Global Certificate to the beneficial owners thereof pursuant to paragraph (b) of this Section 3.05, such U.S. Global Certificate or Offshore Global Certificate, as the case may be, shall be deemed to be surrendered to the Trustee for cancellation, and the Trustee shall execute, authenticate and deliver, to each beneficial owner identified by the Depositary in exchange for its beneficial interest in such U.S. Global Certificate or Offshore 32 26 Global Certificate, as the case may be, an equal aggregate principal amount of U.S. Physical Certificates or Offshore Physical Certificates, as the case may be, of authorized denominations. (e) Any U.S. Physical Certificate delivered in exchange for an interest in the U.S. Global Certificate pursuant to paragraph (b) of this Section 3.05 shall, except as otherwise provided by paragraph (f) of Section 3.06, bear the Private Placement Legend. (f) Any Offshore Physical Certificate delivered in exchange for an interest in an Offshore Global Certificate pursuant to paragraph (b) of this Section shall, except as otherwise provided by paragraph (f) of Section 3.06, bear the applicable legend regarding transfer restrictions set forth in Section 3.02(a). (g) The registered holder of the U.S. Global Certificate or any Offshore Global Certificate may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Agreement or the Certificates. Section 3.06. Special Transfer Provisions. Unless and until (i) an Initial Certificate is sold under an effective Registration Statement, or (ii) an Initial Certificate is exchanged for an Exchange Certificate pursuant to an effective Exchange Offer Registration Statement, in each case pursuant to the Registration Rights Agreement, the following provisions shall apply to such Initial Certificates: (a) Transfers to Non-QIB Institutional Accredited Investors. The following provisions shall apply with respect to the registration of any proposed transfer of a Certificate to any Institutional Accredited Investor which is not a QIB (excluding transfers to or by Non-U.S. Persons): (i) The Registrar shall register the transfer of any Certificate, whether or not such Certificate bears the Private Placement Legend, if (x) the requested transfer is at least three years after the later of the original issue date of the Certificates and the last date on which such Certificate was held by the Company or any affiliate of any such persons or (y) the proposed transferee has delivered to the Registrar a letter substantially in the form of Exhibit D hereto and the aggregate principal amount of the Certificates being transferred is at least $100,000. (ii) If the proposed transferor is an Agent Member holding a beneficial interest in the U.S. Global Certificate, upon receipt by the Registrar of (x) the documents, if any, required by paragraph (i) and (y) instructions given in accordance with the Depositary's and the Registrar's procedures, the 33 27 Registrar shall reflect on its books and records the date of the transfer and a decrease in the principal amount of such U.S. Global Certificate in an amount equal to the principal amount of the beneficial interest in such U.S. Global Certificate to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver to the transferor or at its direction, one or more U.S. Physical Certificates of like tenor and amount. (b) Transfers to QIBs. The following provisions shall apply with respect to the registration of any proposed transfer of an Initial Certificate to a QIB (excluding Non-U.S. Persons): (i) If the Certificate to be transferred consists of U.S. Physical Certificates or an interest in any Temporary Offshore Global Certificate, the Registrar shall register the transfer if such transfer is being made by a proposed transferor who has checked the box provided for on the form of Initial Certificate stating, or has otherwise advised the Trustee and the Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on the form of Initial Certificate stating, or has otherwise advised the Trustee and the Registrar in writing, that it is purchasing the Initial Certificate for its own account or an account with respect to which it exercises sole investment discretion and that it, or the Person on whose behalf it is acting with respect to any such account, is a QIB within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Trust and/or the Company as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A. (ii) Upon receipt by the Registrar of the documents referred to in clause (i) above and instructions given in accordance with the Depositary's and the Registrar's procedures therefor, the Registrar shall reflect on its books and records the date of such transfer and an increase in the principal amount of the U.S. Global Certificate in an amount equal to the principal amount of the U.S. Physical Certificates or interests in the Temporary Offshore Global Certificate, as the case may be, being transferred, and the Trustee shall cancel such Physical Certificates or decrease the amount of such Temporary Offshore Global Certificate so transferred. (c) Transfers of Interests in the Permanent Offshore Global Certificate or Offshore Physical Certificates. The Registrar shall register any transfer of interests in 34 28 the Permanent Offshore Global Certificate or Offshore Physical Certificates without requiring any additional certification. (d) Transfers to Non-U.S. Persons at Any Time. The following provisions shall apply with respect to any registration of any transfer of an Initial Certificate to a Non-U.S. Person: (i) Prior to the Offshore Certificates Exchange Date, the Registrar shall register any proposed transfer of an Initial Certificate to a Non-U.S. Person upon receipt of a certificate substantially in the form set forth as Exhibit C hereto from the proposed transferor. (ii) On and after the Offshore Certificates Exchange Date, the Registrar shall register any proposed transfer to any Non-U.S. Person if the Certificate to be transferred is a U.S. Physical Certificate or an interest in the U.S. Global Certificate, upon receipt of a certificate substantially in the form of Exhibit C from the proposed transferor. The Registrar shall promptly send a copy of such certificate to the Company. (iii) Upon receipt by the Registrar of (x) the documents, if any, required by paragraph (ii) and (y) instructions in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records the date of such transfer and a decrease in the principal amount of such U.S. Global Certificate in an amount equal to the principal amount of the beneficial interest in such U.S. Global Certificate to be transferred, and (B) upon receipt by the Registrar of instructions given in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Offshore Global Certificate in an amount equal to the principal amount of the U.S. Physical Certificate or the U.S. Global Certificate, as the case may be, to be transferred, and the Trustee shall cancel the Physical Certificate, if any, so transferred or decrease the amount of such U.S. Global Certificate. (e) Private Placement Legend. Upon the transfer, exchange or replacement of Certificates not bearing the Private Placement Legend, the Registrar shall deliver Certificates that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Certificates bearing the Private Placement Legend, the Registrar shall deliver only Certificates that bear the Private Placement Legend unless either (i) the circumstances contemplated by paragraph (a)(i)(x) or (e)(ii) of this Section 3.06 exist or (ii) there is delivered to the Registrar an Opinion of Counsel to 35 29 the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act. (f) General. By its acceptance of any Certificate bearing the Private Placement Legend, each Holder of such a Certificate acknowledges the restrictions on transfer of such Certificate set forth in this Agreement and agrees that it will transfer such Certificate only as provided in this Agreement. The Registrar shall not register a transfer of any Certificate unless such transfer complies with the restrictions on transfer of such Certificate set forth in this Agreement. In connection with any transfer of Certificates, each Certificateholder agrees by its acceptance of the Certificates to furnish the Registrar or the Trustee such certifications, legal opinions or other information as either of them may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or a transaction not subject to, the registration requirements of the Securities Act; provided that the Registrar shall not be required to determine the sufficiency of any such certifications, legal opinions or other information. Until such time as no Certificates remain Outstanding, the Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 3.05 or this Section 3.06. The Trustee, if not the Registrar at such time, shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar. Section 3.07. Mutilated, Destroyed, Lost or Stolen Certificates. If (a) any mutilated Certificate is surrendered to the Registrar or the Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Certificate and (b) there is delivered to the Registrar and the Trustee such security, indemnity or bond, as may be required by them to save each of them harmless, then, in the absence of notice to the Registrar or the Trustee that such destroyed, lost or stolen Certificate has been acquired by a bona fide purchaser, and provided that the requirements of Section 8-405 of the Uniform Commercial Code in effect in any applicable jurisdiction are met, the Trustee shall execute, authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate or Certificates, in authorized denominations and of like Fractional Undivided Interest and bearing a number not contemporaneously outstanding. In connection with the issuance of any new Certificate under this Section 3.07, the Trustee may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee and the Registrar) connected therewith. 36 30 Any duplicate Certificate issued pursuant to this Section 3.07 shall constitute conclusive evidence of the appropriate Fractional Undivided Interest in the Trust, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Certificates. Section 3.08. Persons Deemed Owners. Prior to due presentment of a Certificate for registration of transfer, the Trustee, the Registrar and any Paying Agent may treat the Person in whose name any Certificate is registered (as of the day of determination) as the owner of such Certificate for the purpose of receiving distributions pursuant to Article IV and for all other purposes whatsoever, and none of the Trustee, the Registrar or any Paying Agent shall be affected by any notice to the contrary. Section 3.09. Cancellation. All Certificates surrendered for payment or transfer or exchange shall, if surrendered to the Trustee or any agent of the Trustee other than the Registrar, be delivered to the Registrar for cancellation and shall promptly be cancelled by it. No Certificates shall be authenticated in lieu of or in exchange for any Certificates cancelled as provided in this Section, except as expressly permitted by this Agreement. All cancelled Certificates held by the Registrar shall be destroyed and a certification of their destruction delivered to the Trustee. Section 3.10. Temporary Certificates. Until definitive Certificates are ready for delivery, the Trustee shall authenticate temporary Certificates. Temporary Certificates shall be substantially in the form of definitive Certificates but may have insertions, substitutions, omissions and other variations determined to be appropriate by the officers executing the temporary Certificates, as evidenced by their execution of such temporary Certificates. If temporary Certificates are issued, the Trustee will cause definitive Certificates to be prepared without unreasonable delay. After the preparation of definitive Certificates, the temporary Certificates shall be exchangeable for definitive Certificates upon surrender of the temporary Certificates at the office or agency of the Trustee designated for such purpose pursuant to Section 7.12, without charge to the Certificateholder. Upon surrender for cancellation of any one or more temporary Certificates, the Trustee shall execute, authenticate and deliver in exchange therefor a like face amount of definitive Certificates of authorized denominations. Until so exchanged, the temporary Certificates shall be entitled to the same benefits under this Agreement as definitive Certificates. Section 3.11. Limitation of Liability for Payments. All payments and distributions made to Certificateholders shall be made only from the Trust Property and only to the extent that the Trustee shall have sufficient income or proceeds from the Trust 37 31 Property to make such payments in accordance with the terms of Article IV of this Agreement. Each Certificateholder, by its acceptance of a Certificate, agrees that it will look solely to the income and proceeds from the Trust Property for any payment or distribution due to such Certificateholder pursuant to the terms of this Agreement and that it will not have any recourse to the Company, the Trustee, the Loan Trustees, the Liquidity Providers, the Owner Trustees or the Owner Participants, except as otherwise expressly provided herein or in the Intercreditor Agreement. The Company is a party to this Agreement solely for purposes of meeting the requirements of the Trust Indenture Act, and therefore shall not have any right, obligation or liability hereunder (except as otherwise expressly provided herein). ARTICLE IV DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS Section 4.01. Certificate Account and Special Payments Account. (a) The Trustee shall establish and maintain on behalf of the Certificateholders a Certificate Account as one or more non-interest-bearing accounts. The Trustee shall hold such Certificate Account in trust for the benefit of the Certificateholders, and shall make or permit withdrawals therefrom only as provided in this Agreement. On each day when a Scheduled Payment is made to the Trustee under the Intercreditor Agreement with respect to the Certificates, the Trustee, upon receipt thereof, shall immediately deposit the aggregate amount of such Scheduled Payment in such Certificate Account. (b) The Trustee shall establish and maintain on behalf of the Certificateholders a Special Payments Account as one or more accounts, which shall be non-interest bearing except as provided in Section 4.04. The Trustee shall hold the Special Payments Account in trust for the benefit of the Certificateholders and shall make or permit withdrawals therefrom only as provided in this Agreement. On each day when one or more Special Payments are made to the Trustee under the Intercreditor Agreement and upon payment of the Special Redemption Premium to the Trustee under the Note Purchase Agreement with respect to the Certificates, the Trustee, upon receipt thereof, shall immediately deposit the aggregate amount of such Special Payments in such Special Payments Account. (c) The Trustee shall present (or, if applicable, cause the Subordination Agent to present) to the related Loan Trustee of each Equipment Note such Equipment Note on the date of its stated final maturity or, in the case of any Equipment Note which is to be 38 32 redeemed in whole pursuant to the related Indenture, on the applicable redemption date under such Indenture. Section 4.02. Distributions from Certificate Account and Special Payments Account. (a) On each Regular Distribution Date with respect to a series of Certificates or as soon thereafter as the Trustee has confirmed receipt of the payment of all or any part of the Scheduled Payments due on the Equipment Notes held (subject to the Intercreditor Agreement) in the related Trust on such date, the Trustee shall distribute out of the applicable Certificate Account the entire amount deposited therein pursuant to Section 4.01(a). There shall be so distributed to each Certificateholder of record of such series on the Record Date with respect to such Regular Distribution Date (other than as provided in Section 11.01 concerning the final distribution) by check mailed to such Certificateholder, at the address appearing in the Register, such Certificateholder's pro rata share (based on the Fractional Undivided Interest in the Trust held by such Certificateholder) of the total amount in the applicable Certificate Account, except that, with respect to Certificates registered on the Record Date in the name of a Clearing Agency (or its nominee), such distribution shall be made by wire transfer in immediately available funds to the account designated by such Clearing Agency (or such nominee). (b) On each Special Distribution Date with respect to any Special Payment with respect to the Certificates or as soon thereafter as the Trustee has confirmed receipt of any Special Payments due on the Equipment Notes held (subject to the Intercreditor Agreement) in the related Trust or realized upon the sale of such Equipment Notes or receipt of the Special Redemption Premium, the Trustee shall distribute out of the applicable Special Payments Account the entire amount of such applicable Special Payment deposited therein pursuant to Section 4.01(b). There shall be so distributed to each Certificateholder of record of such series on the Record Date with respect to such Special Distribution Date (other than as provided in Section 11.01 concerning the final distribution) by check mailed to such Certificateholder, at the address appearing in the Register, such Certificateholder's pro rata share (based on the Fractional Undivided Interest in the related Trust held by such Certificateholder) of the total amount in the applicable Special Payments Account on account of such Special Payment, except that, with respect to Certificates registered on the Record Date in the name of a Clearing Agency (or its nominee), such distribution shall be made by wire transfer in immediately available funds to the account designated by such Clearing Agency (or such nominee). (c) The Trustee shall, at the expense of the Company, cause notice of each Special Payment with respect to a series of Certificates to be mailed to each Certificateholder at his address as it appears in the Register. In the event of redemption or purchase of Equipment Notes held in the related Trust, such notice shall be mailed not less than 15 days prior to the Special Distribution Date for the Special Payment resulting from such redemption or purchase, which Special Distribution Date shall be the date of such redemption or 39 33 purchase. In the event that any Special Redemption Premium is to be paid by the Company to the Trustee under the Note Purchase Agreement, such notice shall be mailed, together with the notice by the Escrow Paying Agent under Section 2.06 of the Escrow Agreement, not less than 20 days prior to the Special Distribution Date for such amount, which Special Distribution Date shall be the Final Withdrawal Date. In the case of any other Special Payments, such notice shall be mailed as soon as practicable after the Trustee has confirmed that it has received funds for such Special Payment, stating the Special Distribution Date for such Special Payment which shall occur not less than 15 days after the date of such notice and as soon as practicable thereafter. Notices mailed by the Trustee shall set forth: (i) the Special Distribution Date and the Record Date therefor (except as otherwise provided in Section 11.01); (ii) the amount of the Special Payment for each $1,000 face amount Certificate and the amount thereof constituting principal, premium, if any, and interest; (iii) the reason for the Special Payment; and (iv) if the Special Distribution Date is the same date as a Regular Distribution Date for the Certificates, the total amount to be received on such date for each $1,000 face amount Certificate. If the amount of (i) premium, if any, payable upon the redemption or purchase of an Equipment Note or (ii) the Special Redemption Premium, if any, has not been calculated at the time that the Trustee mails notice of a Special Payment, it shall be sufficient if the notice sets forth the other amounts to be distributed and states that any premium received will also be distributed. If any redemption of the Equipment Notes held in any Trust is cancelled, the Trustee, as soon as possible after learning thereof, shall cause notice thereof to be mailed to each Certificateholder at its address as it appears on the Register. Section 4.03. Statements to Certificateholders. (a) On each Regular Distribution Date and Special Distribution Date, the Trustee will include with each distribution of a Scheduled Payment or Special Payment, as the case may be, to Certificateholders a statement setting forth the information provided below (in the case of a Special Payment, including any Special Redemption Premium, reflecting in part the information provided by the Escrow Paying Agent under the Escrow Agreement). Such statement shall set forth (per $1,000 aggregate principal amount of Certificate as to (ii), (iii), (iv) and (v) below) the following information: 40 34 (i) the aggregate amount of funds distributed on such Distribution Date under the Agreement and under the Escrow Agreement, indicating the amount allocable to each source; (ii) the amount of such distribution under this Agreement allocable to principal and the amount allocable to premium (including the Special Redemption Premium), if any; (iii) the amount of such distribution under this Agreement allocable to interest; (iv) the amount of such distribution under the Escrow Agreement allocable to interest; (v) the amount of such distribution under the Escrow Agreement allocable to Deposits; and (vi) the Pool Balance and the Pool Factor. With respect to the Certificates registered in the name of a Clearing Agency or its nominee, on the Record Date prior to each Distribution Date, the Trustee will request from the Clearing Agency a securities position listing setting forth the names of all Clearing Agency Participants reflected on the Clearing Agency's books as holding interests in the Certificates on such Record Date. On each Distribution Date, the Trustee will mail to each such Clearing Agency Participant the statement described above and will make available additional copies as requested by such Clearing Agency Participant for forwarding to holders of interests in the Certificates. (b) Within a reasonable period of time after the end of each calendar year but not later than the latest date permitted by law, the Trustee shall furnish to each Person who at any time during such calendar year was a Certificateholder of record a statement containing the sum of the amounts determined pursuant to clauses (a)(i), (a)(ii), (a)(iii), (a)(iv) and (a)(v) above with respect to the related Trust for such calendar year or, in the event such Person was a Certificateholder of record during a portion of such calendar year, for the applicable portion of such year, and such other items as are readily available to the Trustee and which a Certificateholder shall reasonably request as necessary for the purpose of such Certificateholder's preparation of its federal income tax returns. Such statement and such other items shall be prepared on the basis of information supplied to the Trustee by the Clearing Agency Participants and shall be delivered by the Trustee to such Clearing Agency Participants to be available for forwarding by such Clearing Agency Participants to the holders of interests in the Certificates in the manner described in Section 4.03(a). 41 35 (c) Promptly following (i) the Delivery Period Termination Date, if there has been any change in the information set forth in clauses (x), (y) and (z) below from that set forth in page 65 of the Offering Memorandum, and (ii) any early redemption or purchase of, or any default in the payment of principal or interest in respect of, any of the Equipment Notes held in the Trust, or any Final Withdrawal, the Trustee shall furnish to Certificateholders of record on such date a statement setting forth (x) the expected Pool Balances for each subsequent Regular Distribution Date following the Delivery Period Termination Date, (y) the related Pool Factors for such Regular Distribution Dates and (z) the expected principal distribution schedule of the Equipment Notes, in the aggregate, held as Trust Property at the date of such notice. With respect to the Certificates registered in the name of a Clearing Agency, on the Delivery Period Termination Date, the Trustee will request from such Clearing Agency a securities position listing setting forth the names of all Clearing Agency Participants reflected on such Clearing Agency's books as holding interests in the Certificates on such date. The Trustee will mail to each such Clearing Agency Participant the statement described above and will make available additional copies as requested by such Clearing Agency Participant for forwarding to holders of interests in the Certificates. Section 4.04. Investment of Special Payment Moneys. Any money received by the Trustee pursuant to Section 4.01(b) representing a Special Payment which is not distributed on the date received shall, to the extent practicable, be invested in Permitted Investments by the Trustee pending distribution of such Special Payment pursuant to Section 4.02. Any investment made pursuant to this Section 4.04 shall be in such Permitted Investments having maturities not later than the date that such moneys are required to be used to make the payment required under Section 4.02 on the applicable Special Distribution Date and the Trustee shall hold any such Permitted Investments until maturity. The Trustee shall have no liability with respect to any investment made pursuant to this Section 4.04, other than by reason of the willful misconduct or negligence of the Trustee. All income and earnings from such investments shall be distributed on such Special Distribution Date as part of such Special Payment. ARTICLE V THE COMPANY Section 5.01. Maintenance of Corporate Existence. The Company, at its own cost and expense, will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights and franchises, except as otherwise specifically permitted in Section 5.02; provided, however, that the Company shall not be required to preserve any right or franchise if the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company. 42 36 Section 5.02. Consolidation, Merger, Etc. The Company shall not consolidate with or merge into any other corporation or convey, transfer or lease substantially all of its assets as an entirety to any Person unless: (a) the corporation formed by such consolidation or into which the Company is merged or the Person that acquires by conveyance, transfer or lease substantially all of the assets of the Company as an entirety shall be (i) organized and validly existing under the laws of the United States of America or any state thereof or the District of Columbia, (ii) a "citizen of the United States" as defined in 49 U.S.C. Section 40102(a)(15), as amended, and (iii) a United States certificated air carrier, if and so long as such status is a condition of entitlement to the benefits of Section 1110 of the Bankruptcy Reform Act of 1978, as amended (11 U.S.C. Section 1110), with respect to the Leases or the Aircraft owned by the Company; (b) the corporation formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance, transfer or lease substantially all of the assets of the Company as an entirety shall execute and deliver to the Trustee applicable to the Certificates a duly authorized, valid, binding and enforceable agreement in form and substance reasonably satisfactory to the Trustee containing an assumption by such successor corporation or Person of the due and punctual performance and observance of each covenant and condition of the Note Documents and of this Agreement applicable to the Certificates to be performed or observed by the Company; and (c) the Company shall have delivered to the Trustee an Officer's Certificate of the Company and an Opinion of Counsel of the Company reasonably satisfactory to the Trustee, each stating that such consolidation, merger, conveyance, transfer or lease and the assumption agreement mentioned in clause (b) above comply with this Section 5.02 and that all conditions precedent herein provided for relating to such transaction have been complied with. Upon any consolidation or merger, or any conveyance, transfer or lease of substantially all of the assets of the Company as an entirety in accordance with this Section 5.02, the successor corporation or Person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Agreement applicable to the Certificates with the same effect as if such successor corporation or Person had been named as the Company herein. No such conveyance, transfer or lease of substantially all of the assets of the Company as an entirety shall have the effect of releasing any successor corporation or Person which shall have become such in the manner prescribed in this Section 5.02 from its liability in respect of this Agreement and any Note Document applicable to the Certificates to which it is a party. 43 37 ARTICLE VI DEFAULT Section 6.01. Events of Default. (a) Exercise of Remedies. Upon the occurrence and during the continuation of any Indenture Default under any Indenture, the Trustee may, to the extent it is the Controlling Party at such time (as determined pursuant to the Intercreditor Agreement), direct the exercise of remedies as provided in the Intercreditor Agreement. (b) Purchase Rights of Certificateholders. By acceptance of its Certificate, each Certificateholder agrees that at any time after the occurrence and during the continuation of a Triggering Event, each Class D Certificateholder shall have the right to purchase all, but not less than all, of the Certificates, the Class A Certificates and the Class B Certificates upon ten days' written notice to the Trustee, the Class A Trustee, the Class B Trustee and each other Class D Certificateholder, provided that (A) if prior to the end of such ten-day period any other Class D Certificateholder notifies such purchasing Class D Certificateholder that such other Class D Certificateholder wants to participate in such purchase, then such other Class D Certificateholder may join with the purchasing Class D Certificateholder to purchase all, but not less than all, of the Certificates, the Class A Certificates and the Class B Certificates pro rata based on the Fractional Undivided Interest in the Class D Trust held by each such Class D Certificateholder and (B) if prior to the end of such ten-day period any other Class D Certificateholder fails to notify the purchasing Class D Certificateholder of such other Class D Certificateholder's desire to participate in such a purchase, then such other Class D Certificateholder shall lose its right to purchase the Certificates pursuant to this Section 6.01(b). The purchase price with respect to the Certificates shall be equal to the Pool Balance of the Certificates, together with accrued and unpaid interest thereon to the date of such purchase, without premium, but including any other amounts then due and payable to the Certificateholders under this Agreement, the Intercreditor Agreement, the Escrow Agreement or any Note Document or on or in respect of the Certificates; provided, however, that (i) if such purchase occurs after the record date specified in Section 2.03(b) of the Escrow Agreement relating to the distribution of unused Deposits and accrued and unpaid interest thereunder, such purchase price shall be reduced by the aggregate amount of unused Deposits and interest to be distributed under the Escrow Agreement (which deducted amounts shall remain distributable to, and may be retained by, the Certificateholder as of such Record Date) and (ii) if such purchase occurs after a Record Date, such purchase price shall be reduced by the amount to be distributed hereunder on the related Distribution Date (which deducted amounts shall remain distributable to, and may be retained by, the Certificateholder as of such Record Date); provided further that no such purchase of Certificates shall be 44 38 effective unless the purchaser(s) shall certify to the Trustee that contemporaneously with such purchase, such purchaser(s) is purchasing, pursuant to the terms of this Agreement and the Other Agreements, the Certificates, the Class A Certificates and the Class B Certificates which are senior to the securities held by such purchaser(s). Each payment of the purchase price of the Certificates referred to in the first sentence hereof shall be made to an account or accounts designated by the Trustee and each such purchase shall be subject to the terms of this Section 6.01(b). Each Certificateholder agrees by its acceptance of its Certificate that it will, subject to Section 3.04 of this Agreement, upon payment from such Class D Certificateholder(s), as the case may be, of the purchase price set forth in the first sentence of this paragraph, forthwith sell, assign, transfer and convey to the purchaser(s) thereof (without recourse, representation or warranty of any kind except for its own acts), all of the right, title, interest and obligation of such Certificateholder in this Agreement, the Escrow Agreement, the Deposit Agreement, the Intercreditor Agreement, the Liquidity Facilities, the Note Documents and all Certificates and Escrow Receipts held by such Certificateholder (excluding all right, title and interest under any of the foregoing to the extent such right, title or interest is with respect to an obligation not then due and payable as respects any action or inaction or state of affairs occurring prior to such sale) and the purchaser shall assume all of such Certificateholder's obligations under this Agreement, the Escrow Agreement, the Deposit Agreement, the Intercreditor Agreement, the Liquidity Facilities, the Note Documents and all such Certificates and Escrow Receipts. The Certificates will be deemed to be purchased on the date payment of the purchase price is made notwithstanding the failure of the Certificateholders to deliver any Certificates and, upon such a purchase, (i) the only rights of the Certificateholders will be to deliver the Certificates to the purchaser(s) and receive the purchase price for such Certificates and (ii) if the purchaser(s) shall so request, such Certificateholder will comply with all the provisions of Section 3.04 of this Agreement to enable new Certificates to be issued to the purchaser in such denominations as it shall request. All charges and expenses in connection with the issuance of any such new Certificates shall be borne by the purchaser thereof. As used in this Section 6.01, the terms "Class A Certificateholder", "Class A Trust", "Class A Certificate", "Class A Trustee", "Class B Certificate", "Class B Certificateholder", "Class B Trust", "Class B Trustee", "Class D Certificateholder" and "Class D Trust", shall have the respective meanings assigned to such terms in the Intercreditor Agreement. Section 6.02. Incidents of Sale of Equipment Notes. Upon any sale of all or any part of the Equipment Notes held in the Trust made either under the power of sale given under this Agreement or otherwise for the enforcement of this Agreement, the following shall be applicable: (a) Certificateholders and Trustee May Purchase Equipment Notes. Any Certificateholder, the Trustee in its individual or any other capacity or any other 45 39 Person may bid for and purchase any of the Equipment Notes held in the Trust, and upon compliance with the terms of sale, may hold, retain, possess and dispose of such Equipment Notes in their own absolute right without further accountability. (b) Receipt of Trustee Shall Discharge Purchaser. The receipt of the Trustee making such sale shall be a sufficient discharge to any purchaser for his purchase money, and, after paying such purchase money and receiving such receipt, such purchaser or its personal representative or assigns shall not be obliged to see to the application of such purchase money, or be in any way answerable for any loss, misapplication or nonapplication thereof. (c) Application of Moneys Received upon Sale. Any moneys collected by the Trustee upon any sale made either under the power of sale given by this Agreement or otherwise for the enforcement of this Agreement shall be applied as provided in Section 4.02. Section 6.03. Judicial Proceedings Instituted by Trustee; Trustee May Bring Suit. If there shall be a failure to make payment of the principal of, premium, if any, or interest on any Equipment Note held in the Trust, or if there shall be any failure to pay Rent (as defined in the relevant Lease) under any Lease when due and payable, then the Trustee, in, its own name and as trustee of an express trust, as holder of such Equipment Notes, to the extent permitted by and in accordance with the terms of any related Intercreditor Agreement and any related Note Documents (subject to rights of the applicable Owner Trustee or Owner Participant to cure any such failure to pay principal of, premium, if any, or interest on any Equipment Note or to pay Rent under any Lease in accordance with the applicable Indenture), shall be entitled and empowered to institute any suits, actions or proceedings at law, in equity or otherwise, for the collection of the sums so due and unpaid on such Equipment Notes or under such Lease and may prosecute any such claim or proceeding to judgment or final decree with respect to the whole amount of any such sums so due and unpaid. Section 6.04. Control by Certificateholders. Subject to Section 6.03 and the Intercreditor Agreement, the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the related Trust shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee with respect to the Trust or pursuant to the terms of the Intercreditor Agreement, or exercising any trust or power conferred on the Trustee under this Agreement or the Intercreditor Agreement, including any right of the Trustee as Controlling Party under the Intercreditor Agreement or as holder of the Equipment Notes held in the related Trust; provided, however, that 46 40 (a) such Direction shall not in the opinion of the Trustee be in conflict with any rule of law or with this Agreement and would not involve the Trustee in personal liability or expense, (b) the Trustee shall not determine that the action so directed would be unjustly prejudicial to the Certificateholders not taking part in such Direction, and (c) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such Direction. Section 6.05. Waiver of Past Defaults. Subject to any related Intercreditor Agreement, the Certificateholders holding Certificates of a series evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust (i) may on behalf of all of the Certificateholders waive any past Event of Default hereunder and its consequences or (ii) if the Trustee is the Controlling Party, may direct the Trustee to instruct the applicable Loan Trustee to waive any past Indenture Event of Default under any related Indenture and its consequences, and thereby annul any Direction given by such Certificateholders or the Trustee to such Loan Trustee with respect thereto, except a default: (a) in the deposit of any Scheduled Payment or Special Payment under Section 4.01 or in the distribution of any payment under Section 4.02 on the Certificates, or (b) in the payment of the principal of (premium, if any) or interest on the Equipment Notes held in the Trust, or (c) in respect of a covenant or provision hereof which under Article IX hereof cannot be modified or amended without the consent of each Certificateholder holding an Outstanding Certificate of a series affected thereby. Upon any such waiver, such default shall cease to exist with respect to the Certificates and any Event of Default arising therefrom shall be deemed to have been cured for every purpose and any direction given by the Trustee on behalf of the Certificateholders to the relevant Loan Trustee shall be annulled with respect thereto; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Upon any such waiver, the Trustee shall vote the Equipment Notes issued under the relevant Indenture to waive the corresponding Indenture Event of Default. Section 6.06. Right of Certificateholders to Receive Payments Not to Be Impaired. Anything in this Agreement to the contrary notwithstanding, including, without limitation, Section 6.07 hereof, but subject to the Intercreditor Agreement, the right of any Certificateholder to receive distributions of payments required pursuant to Section 4.02 47 41 hereof on the applicable Certificates when due, or to institute suit for the enforcement of any such payment on or after the applicable Regular Distribution Date or Special Distribution Date, shall not be impaired or affected without the consent of such Certificateholder. Section 6.07. Certificateholders May Not Bring Suit Except Under Certain Conditions. A Certificateholder shall not have the right to institute any suit, action or proceeding at law or in equity or otherwise with respect to this Agreement, for the appointment of a receiver or for the enforcement of any other remedy under this Agreement, unless: (a) such Certificateholder previously shall have given written notice to the Trustee of a continuing Event of Default; (b) Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than 25% of the related Trust shall have requested the Trustee in writing to institute such action, suit or proceeding and shall have offered to the Trustee indemnity as provided in Section 7.03(e); (c) the Trustee shall have refused or neglected to institute any such action, suit or proceeding for 60 days after receipt of such notice, request and offer of indemnity; and (d) no direction inconsistent with such written request shall have been given to the Trustee during such 60-day period by Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust. It is understood and intended that no one or more of the Certificateholders shall have any right in any manner whatsoever hereunder or under the related Trust Supplement or under the Certificates to (i) surrender, impair, waive, affect, disturb or prejudice any property in the Trust Property of the Trust, or the lien of any related Indenture on any property subject thereto, or the rights of the Certificateholders or the holders of the Equipment Notes, (ii) obtain or seek to obtain priority over or preference with respect to any other such Certificateholder or (iii) enforce any right under this Agreement, except in the manner herein provided and for the equal, ratable and common benefit of all the Certificateholders subject to the provisions of this Agreement. Section 6.08. Remedies Cumulative. Every remedy given hereunder to the Trustee or to any of the Certificateholders shall not be exclusive of any other remedy or remedies, and every such remedy shall be cumulative and in addition to every other remedy given hereunder or now or hereafter given by statute, law, equity or otherwise. 48 42 Section 6.09. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Agreement, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of such suit, and may assess costs against any such party litigant, in the manner and to the extent provided in the Trust Indenture Act; provided, however, that neither this Section 6.09 nor the Trust Indenture Act shall be deemed to authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Company. ARTICLE VII THE TRUSTEE Section 7.01. Certain Duties and Responsibilities. (a) Except during the continuance of an Event of Default in respect of a Trust, the Trustee undertakes to perform such duties in respect of the Trust as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Trustee. (b) In case an Event of Default in respect of a Trust has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Agreement in respect of the Trust, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (c) No provision of this Agreement shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that (i) this Subsection shall not be construed to limit the effect of Subsection (a) of this Section 7.01; and (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts. (d) Whether or not herein expressly so provided, every provision of this Agreement relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 7.01. Section 7.02. Notice of Defaults. As promptly as practicable after, and in any event within 90 days after, the occurrence of any default (as such term is defined below) 49 43 hereunder known to the Trustee, the Trustee shall transmit by mail to the Company, any Owner Trustees, the Owner Participants, the Loan Trustees and the Certificateholders holding Certificates in accordance with Section 313(c) of the Trust Indenture Act, notice of such default hereunder known to the Trustee, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal, premium, if any, or interest on any Equipment Note, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith shall determine that the withholding of such notice is in the interests of the Certificateholders. For the purpose of this Section 7.02 in respect of any Trust, the term "default" means any event that is, or after notice or lapse of time or both would become, an Event of Default in respect of that Trust. Section 7.03. Certain Rights of Trustee. Subject to the provisions of Section 315 of the Trust Indenture Act: (a) the Trustee may rely and shall be protected in acting or refraining from acting in reliance upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Request; (c) whenever in the administration of this Agreement or the Intercreditor Agreement, the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officer's Certificate of the Company, any Owner Trustee or any Loan Trustee; (d) the Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement or the Intercreditor Agreement at the Direction of any of the Certificateholders pursuant to this Agreement or the Intercreditor Agreement, unless the Certificateholders shall have offered to the Trustee reasonable 50 44 security or indemnity against the cost, expenses and liabilities which might be incurred by it in compliance with such Direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document; (g) the Trustee may execute any of the trusts or powers under this Agreement or the Intercreditor Agreement or perform any duties under this Agreement or the Intercreditor Agreement either directly or by or through agents or attorneys, and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it under this Agreement or the Intercreditor Agreement; (h) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the Direction of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Agreement or the Intercreditor Agreement; and (i) the Trustee shall not be required to expend or risk its own funds in the performance of any of its duties under this Agreement, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk is not reasonably assured to it. Section 7.04. Not Responsible for Recitals or Issuance of Certificates. The recitals contained herein and in the Certificates, except the certificates of authentication, shall not be taken as the statements of the Trustee, and the Trustee assumes no responsibility for their correctness. Subject to Section 7.15, the Trustee makes no representations as to the validity or sufficiency of this Agreement, any Equipment Notes, the Intercreditor Agreement, the Deposit Agreement, the Escrow Agreement, the Certificates, or any Note Documents, except that the Trustee hereby represents and warrants that this Agreement has been, and the Registration Rights Agreement, each Certificate, the Note Purchase Agreement, the Escrow Agreement and the Intercreditor Agreement will be, executed and delivered by one of its officers who is duly authorized to execute and deliver such document on its behalf. Section 7.05. May Hold Certificates. The Trustee, any Paying Agent, Registrar or any of their Affiliates or any other agent, in their respective individual or any other capacity, may become the owner or pledgee of Certificates and, subject to Sections 51 45 310(b) and 311 of the Trust Indenture Act, if applicable, may otherwise deal with the Company, any Owner Trustees or the Loan Trustees with the same rights it would have if it were not Trustee, Paying Agent, Registrar or such other agent. Section 7.06. Money Held in Trust. Money held by the Trustee or the Paying Agent in trust under this Agreement need not be segregated from other funds except to the extent required herein or by law and neither the Trustee nor the Paying Agent shall have any liability for interest upon any such moneys except as provided for herein. Section 7.07. Compensation and Reimbursement. The Company agrees: (a) to pay, or cause to be paid, to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); and (b) to reimburse, or cause to be reimbursed, the Trustee upon its request for all reasonable out- of-pocket expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Agreement or the Intercreditor Agreement (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence, willful misconduct or bad faith or as may be incurred due to the Trustee's breach of its representations and warranties set forth in Section 7.15; and (c) to indemnify the Trustee with respect to the Certificates, pursuant to Section 8.1 of the Owned Aircraft Participation Agreements and Section 9.1 of the Leased Aircraft Participation Agreements, as the case may be. The Trustee shall be entitled to reimbursement from, and shall have a lien prior to the Certificates upon, all property and funds held or collected by the Trustee in its capacity as Trustee for any tax incurred without negligence, bad faith or willful misconduct, on its part, arising out of or in connection with the acceptance or administration of the Trust (other than any tax attributable to the Trustee's compensation for serving as such), including any costs and expenses incurred in contesting the imposition of any such tax. The Trustee shall notify the Company of any claim for any tax for which it may seek reimbursement. If the Trustee reimburses itself from the Trust Property of such Trust for any such tax, it will mail a brief report within 30 days setting forth the amount of such tax and the circumstances thereof to all Certificateholders as their names and addresses appear in the Register. Section 7.08. Corporate Trustee Required; Eligibility. The Trust shall at all times have a Trustee which shall be eligible to act as a trustee under Section 310(a) of the 52 46 Trust Indenture Act and shall have a combined capital and surplus of at least $75,000,000 (or a combined capital and surplus in excess of $5,000,000 and the obligations of which, whether now in existence or hereafter incurred, are fully and unconditionally guaranteed by a corporation organized and doing business under the laws of the United States, any state or territory thereof or of the District of Columbia and having a combined capital and surplus of at least $75,000,000). If such corporation publishes reports of conditions at least annually, pursuant to law or to the requirements of federal, state, territorial or District of Columbia supervising or examining authority, then for the purposes of this Section 7.08 the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of conditions so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 7.08 to act as Trustee of the Trust, the Trustee shall resign immediately as Trustee of the Trust in the manner and with the effect specified in Section 7.09. Section 7.09. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee of the Trust pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 7.10. (b) The Trustee may resign at any time as Trustee of the Trust by giving prior written notice thereof to the Company, the Authorized Agents, the Owner Trustees and the Loan Trustees. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Company, the Owner Trustees and the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by Direction of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in such Trust delivered to the Trustee and to the Company, the Owner Trustees and the Loan Trustees. (d) If at any time in respect of the Trust: (i) the Trustee shall fail to comply with Section 310 of the Trust Indenture Act, if applicable, after written request therefor by the Company or by any Certificateholder who has been a bona fide Certificateholder for at least six months; or 53 47 (ii) the Trustee shall cease to be eligible under Section 7.08 and shall fail to resign after written request therefor by the Company or by any such Certificateholder; or (iii) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then, in any case, (i) the Company may remove the Trustee or (ii) any Certificateholder who has been a bona fide Certificateholder for at least six months may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee of the Trust. (e) If a Responsible Officer of the Trustee shall obtain actual knowledge of an Avoidable Tax (as defined below) in respect of any Trust which has been or is likely to be asserted, the Trustee shall promptly notify the Company and shall, within 30 days of such notification, resign as Trustee of such Trust hereunder unless within such 30-day period the Trustee shall have received notice that the Company has agreed to pay such tax. The Company shall promptly appoint a successor Trustee of such Trust in a jurisdiction where there are no Avoidable Taxes. As used herein, an "Avoidable Tax" in respect of such Trust means a state or local tax: (i) upon (w) such Trust, (x) such Trust Property, (y) Certificateholders of the Trust or (z) the Trustee for which the Trustee is entitled to seek reimbursement from the Trust Property of such Trust, and (ii) which would be avoided if the Trustee were located in another state, or jurisdiction within a state, within the United States of America. A tax shall not be an Avoidable Tax in respect of any Trust if the Company or any Owner Trustee shall agree to pay, and shall pay, such tax. (f) If the Trustee shall resign, be removed or become incapable of acting as Trustee of the Trust or if a vacancy shall occur in the office of the Trustee of the Trust for any cause, the Company shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or other occurrence of such vacancy, a successor Trustee shall be appointed by Direction of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in such Trust delivered to the Company, the Owner Trustees, the Loan Trustee and the retiring Trustee, then the successor Trustee so appointed shall, with the approval of the Company of such appointment, which approval shall not be unreasonably withheld, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed as provided above. If no successor Trustee shall have been so appointed as provided above and accepted appointment in the manner hereinafter provided, the resigning Trustee or any Certificateholder who has been a bona fide Certificateholder of the related series for at least six months may, on behalf of himself and all others similarly 54 48 situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (g) The successor Trustee shall give notice of the resignation and removal of the Trustee and appointment of the successor Trustee by mailing written notice of such event by first-class mail, postage prepaid, to the Certificateholders as their names and addresses appear in the Register. Each notice shall include the name of such successor Trustee and the address of its Corporate Trust Office. Section 7.10. Acceptance of Appointment by Successor. Every successor Trustee appointed hereunder shall execute and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Company or the successor Trustee, such retiring Trustee shall execute and deliver an instrument transferring to such successor Trustee all such rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all Trust Property held by such retiring Trustee, subject nevertheless to its lien, if any, provided for in Section 7.07. Upon request of any such successor Trustee, the Company, the retiring Trustee and such successor Trustee shall execute and deliver any and all instruments containing such provisions as shall be necessary or desirable to transfer and confirm to, and for more fully and certainly vesting in, such successor Trustee all such rights, powers and trusts. No institution shall accept its appointment as a Trustee hereunder unless at the time of such acceptance such institution shall be qualified and eligible under this Article VII. Section 7.11. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder; provided, however, that such corporation shall be otherwise qualified and eligible under this Article VII, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Certificates shall have been executed or authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such execution or authentication and deliver the Certificates so executed or authenticated with the same effect as if such successor Trustee had itself executed or authenticated such Certificates. Section 7.12. Maintenance of Agencies. (a) With respect to each series of Certificates, there shall at all times be maintained an office or agency in the location set forth 55 49 in Section 12.04 where Certificates may be presented or surrendered for registration of transfer or for exchange, and for payment thereof, and where notices and demands, to or upon the Trustee in respect of such Certificates or this Agreement may be served; provided, however, that, if it shall be necessary that the Trustee maintain an office or agency in another location with respect to the Certificates (e.g., the Certificates shall be represented by Definitive Certificates and shall be listed on a national securities exchange), the Trustee will make all reasonable efforts to establish such an office or agency. Written notice of the location of each such other office or agency and of any change of location thereof shall be given by the Trustee to the Company, any Owner Trustees, the Loan Trustees (in the case of any Owner Trustee or Loan Trustee, at its address specified in the Note Documents or such other address as may be notified to the Trustee) and the Certificateholders. In the event that no such office or agency shall be maintained or no such notice of location or of change of location shall be given, presentations and demands may be made and notices may be served at the Corporate Trust Office of the Trustee. (b) There shall at all times be a Registrar and a Paying Agent hereunder with respect to the Certificates. Each such Authorized Agent shall be a bank or trust company, shall be a corporation organized and doing business under the laws of the United States or any state, with a combined capital and surplus of at least $75,000,000, or a corporation having a combined capital and surplus in excess of $5,000,000, the obligations of which are guaranteed by a corporation organized and doing business under the laws of the United States or any state, with a combined capital and surplus of at least $75,000,000, and shall be authorized under such laws to exercise corporate trust powers, subject to supervision by federal or state authorities. The Trustee shall initially be the Paying Agent and, as provided in Section 3.04, Registrar hereunder with respect to the Certificates. Each Registrar shall furnish to the Trustee, at stated intervals of not more than six months, and at such other times as the Trustee may request in writing, a copy of the Register maintained by such Registrar. (c) Any corporation into which any Authorized Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which any Authorized Agent shall be a party, or any corporation succeeding to the corporate trust business of any Authorized Agent, shall be the successor of such Authorized Agent, if such successor corporation is otherwise eligible under this Section 7.12, without the execution or filing of any paper or any further act on the part of the parties hereto or such Authorized Agent or such successor corporation. (d) Any Authorized Agent may at any time resign by giving written notice of resignation to the Trustee, the Company, any Owner Trustees and the Loan Trustees. The Company may, and at the request of the Trustee shall, at any time terminate the agency of any Authorized Agent by giving written notice of termination to such Authorized Agent and to the Trustee. Upon the resignation or termination of an Authorized Agent or in case at any 56 50 time any such Authorized Agent shall cease to be eligible under this Section 7.12 (when, in either case, no other Authorized Agent performing the functions of such Authorized Agent shall have been appointed), the Company shall promptly appoint one or more qualified successor Authorized Agents, reasonably satisfactory to the Trustee, to perform the functions of the Authorized Agent which has resigned or whose agency has been terminated or who shall have ceased to be eligible under this Section 7.12. The Company shall give written notice of any such appointment made by it to the Trustee, any Owner Trustees and the Loan Trustees; and in each case the Trustee shall mail notice of such appointment to all Certificateholders as their names and addresses appear on the Register for such series. (e) The Company agrees to pay, or cause to be paid, from time to time to each Authorized Agent reasonable compensation for its services and to reimburse it for its reasonable expenses. Section 7.13. Money for Certificate Payments to Be Held in Trust. All moneys deposited with any Paying Agent for the purpose of any payment on Certificates shall be deposited and held in trust for the benefit of the Certificateholders entitled to such payment, subject to the provisions of this Section 7.13. Moneys so deposited and held in trust shall constitute a separate trust fund for the benefit of the Certificateholders with respect to which such money was deposited. The Trustee may at any time, for the purpose of obtaining the satisfaction and discharge of this Agreement or for any other purpose, direct any Paying Agent to pay to the Trustee all sums held in trust by such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Section 7.14. Registration of Equipment Notes in Trustee's Name. Subject to the provisions of any Intercreditor Agreement, the Trustee agrees that all Equipment Notes to be purchased by any Trust and Permitted Investments, if any, shall be issued in the name of the Trustee as trustee for the applicable Trust or its nominee and held by the Trustee in trust for the benefit of the Certificateholders, or, if not so held, the Trustee or its nominee shall be reflected as the owner of such Equipment Notes or Permitted Investments, as the case may be, in the register of the issuer of such Equipment Notes or Permitted Investments, as the case may be. Section 7.15. Representations and Warranties of Trustee. The Trustee hereby represents and warrants that: (a) the Trustee is a Delaware banking corporation organized and validly existing in good standing under the laws of the State of Delaware; 57 51 (b) the Trustee has full power, authority and legal right to execute, deliver and perform this Agreement, the Escrow Agreement, the Intercreditor Agreement, the Note Documents and the Note Purchase Agreement and has taken all necessary action to authorize the execution, delivery and performance by it of this Agreement, the Escrow Agreement, the Intercreditor Agreement, the Note Documents and the Note Purchase Agreement; (c) the execution, delivery and performance by the Trustee of this Agreement, the Escrow Agreement, the Intercreditor Agreement, the Note Documents and the Note Purchase Agreement (i) will not violate any provision of any United States federal law or the law of the state of the United States where it is located governing the banking and trust powers of the Trustee or any order, writ, judgment, or decree of any court, arbitrator or governmental authority applicable to the Trustee or any of its assets, (ii) will not violate any provision of the articles of association or by-laws of the Trustee, and (iii) will not violate any provision of, or constitute, with or without notice or lapse of time, a default under, or result in the creation or imposition of any lien on any properties included in the Trust Property pursuant to the provisions of any mortgage, indenture, contract, agreement or other undertaking to which it is a party, which violation, default or lien could reasonably be expected to have an adverse effect on the Trustee's performance or ability to perform its duties hereunder or thereunder or on the transactions contemplated herein or therein; (d) the execution, delivery and performance by the Trustee of this Agreement, the Escrow Agreement, the Intercreditor Agreement, the Note Documents and the Note Purchase Agreement will not require the authorization, consent, or approval of, the giving of notice to, the filing or registration with, or the taking of any other action in respect of, any governmental authority or agency of the United States or the state of the United States where it is located regulating the banking and corporate trust activities of the Trustee; and (e) this Agreement, the Escrow Agreement, the Intercreditor Agreement, the Note Documents and the Note Purchase Agreement have been duly executed and delivered by the Trustee and constitute the legal, valid and binding agreements of the Trustee, enforceable against it in accordance with their respective terms; provided, however, that enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and (ii) general principles of equity. Section 7.16. Withholding Taxes; Information Reporting. As to the Certificates, the Trustee, as trustee of the related grantor trust created by this Agreement, shall exclude and withhold from each distribution of principal, premium, if any, and interest and other amounts due under this Agreement or under the Certificates any and all 58 52 withholding taxes applicable thereto as required by law. The Trustee agrees to act as such withholding agent and, in connection therewith, whenever any present or future taxes or similar charges are required to be withheld with respect to any amounts payable in respect of the Certificates, to withhold such amounts and timely pay the same to the appropriate authority in the name of and on behalf of the Certificateholders, that it will file any necessary withholding tax returns or statements when due, and that, as promptly as possible after the payment thereof, it will deliver to each such Certificateholder appropriate documentation showing the payment thereof, together with such additional documentary evidence as such Certificateholders may reasonably request from time to time. The Trustee agrees to file any other information reports as it may be required to file under United States law. Section 7.17. Trustee's Liens. The Trustee in its individual capacity agrees that it will, in respect of each Trust created by this Agreement, at its own cost and expense promptly take any action as may be necessary to duly discharge and satisfy in full any mortgage, pledge, lien, charge, encumbrance, security interest or claim ("Trustee's Liens") on or with respect to the Trust Property of such Trust which is attributable to the Trustee either (i) in its individual capacity and which is unrelated to the transactions contemplated by this Agreement, the Intercreditor Agreement, the Note Purchase Agreement or the Note Documents or (ii) as Trustee hereunder or in its individual capacity and which arises out of acts or omissions which are not contemplated by this Agreement. Section 7.18. Preferential Collection of Claims. The Trustee shall comply with Section 311(a) of the Trust Indenture Act, excluding any creditor relationship listed in Section 311(b) of the Trust Indenture Act. If the Trustee shall resign or be removed as Trustee, it shall be subject to Section 311(a) of the Trust Indenture Act to the extent provided therein. ARTICLE VIII CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE Section 8.01. The Company to Furnish Trustee with Names and Addresses of Certificateholders. The Company will furnish to the Trustee within 15 days after each Record Date with respect to a Scheduled Payment, and at such other times as the Trustee may request in writing within 30 days after receipt by the Company of any such request, a list, in such form as the Trustee may reasonably require, of all information in the possession or control of the Company as to the names and addresses of the Certificateholders, in each case as of a date not more than 15 days prior to the time such list is furnished; provided, however, that so long as the Trustee is the sole Registrar, no such list need be furnished; and provided further, however, that no such list need be furnished for so long as a copy of the Register is being furnished to the Trustee pursuant to Section 7.12. 59 53 Section 8.02. Preservation of Information; Communications to Certificateholders. The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Certificateholders contained in the most recent list furnished to the Trustee as provided in Section 7.12 or Section 8.01, as the case may be, and the names and addresses of Certificateholders of each series received by the Trustee in its capacity as Registrar, if so acting. The Trustee may destroy any list furnished to it as provided in Section 7.12 or Section 8.01, as the case may be, upon receipt of a new list so furnished. Section 8.03. Reports by Trustee. Within 60 days after May 15 of each year commencing with the first full year following the issuance of any series of Certificates, the Trustee shall transmit to the Certificateholders, as provided in Section 313(c) of the Trust Indenture Act, a brief report dated as of such May 15, if required by Section 313(a) of the Trust Indenture Act. Section 8.04. Reports by the Company. The Company shall: (a) file with the Trustee, within 30 days after the Company is required to file the same with the SEC, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may from time to time by rules and regulations prescribe) which the Company is required to file with the SEC pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934, as amended; or, if the Company is not required to file information, documents or reports pursuant to either of such sections, then to file with the Trustee and the SEC, in accordance with rules and regulations prescribed by the SEC, such of the supplementary and periodic information, documents and reports which may be required pursuant to section 13 of the Securities Exchange Act of 1934, as amended, in respect of a security listed and registered on a national securities exchange as may be prescribed in such rules and regulations; (b) file with the Trustee and the SEC, in accordance with the rules and regulations prescribed by the SEC, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of the Company provided for in this Agreement, as may be required by such rules and regulations, including, in the case of annual reports, if required by such rules and regulations, certificates or opinions of independent public accountants, conforming to the requirements of Section 1.02; (c) transmit to all Certificateholders, in the manner and to the extent provided in Section 313(c) of the Trust Indenture Act such summaries of any information, documents and reports required to be filed by the Company pursuant to 60 54 subsections (a) and (b) of this Section 8.04 as may be required by rules and regulations prescribed by the SEC; and (d) furnish to the Trustee, not less often than annually, a brief certificate from the principal executive officer, principal financial officer or principal accounting officer as to his knowledge of the Company's compliance with all conditions and covenants under this Agreement (it being understood that for purposes of this paragraph (d), such compliance shall be determined without regard to any period of grace or requirement of notice provided under this Agreement). ARTICLE IX SUPPLEMENTAL AGREEMENTS Section 9.01. Supplemental Agreements Without Consent of Certificateholders. Without the consent of the Certificateholders, the Company may (but will not be required to), and the Trustee (subject to Section 9.03) shall, at the Company's request, at any time and from time to time, enter into one or more agreements supplemental hereto or to the Intercreditor Agreement, the Escrow Agreement, the Note Purchase Agreement, the Deposit Agreement or a Liquidity Facility, in form satisfactory to the Trustee, for any of the following purposes: (a) to provide for the formation of a Trust, the issuance of a series of Certificates and other matters contemplated by Section 2.01(b); or (b) to evidence the succession of another corporation to the Company and the assumption by any such successor of the covenants of the Company herein contained or of the Company's obligations under the Intercreditor Agreement, the Note Purchase Agreement, the Indemnity Agreement or any Liquidity Facility or to evidence the succession of another corporation to the Depositary or any Liquidity Provider and the assumption by any such successor of the obligations of the Depositary or such Liquidity Provider, as the case may be, under the Intercreditor Agreement, the Note Purchase Agreement, the Deposit Agreement, the Indemnity Agreement or any Liquidity Facility; or (c) to add to the covenants of the Company for the benefit of the Certificateholders, or to surrender any right or power conferred upon the Company in this Agreement, the Intercreditor Agreement, the Note Purchase Agreement or any Liquidity Facility; or 61 55 (d) to correct or supplement any provision in this Agreement, the Intercreditor Agreement, the Escrow Agreement, the Note Purchase Agreement, the Deposit Agreement or any Liquidity Facility which may be defective or inconsistent with any other provision herein or therein or to cure any ambiguity or to modify any other provision with respect to matters or questions arising under this Agreement, the Intercreditor Agreement, the Escrow Agreement, the Note Purchase Agreement, the Deposit Agreement or any Liquidity Facility, provided, however, that any such action shall not materially adversely affect the interests of the Certificateholders; to correct any mistake in this Agreement, the Intercreditor Agreement or any Liquidity Facility; or, as provided in the Intercreditor Agreement, to give effect to or provide for a Replacement Liquidity Facility (as defined in the Intercreditor Agreement); or (e) to comply with any requirement of the SEC, any applicable law, rules or regulations of any exchange or quotation system on which the Certificates are listed or of any regulatory body; or (f) to modify, eliminate or add to the provisions of this Agreement, the Intercreditor Agreement or any Liquidity Facility to such extent as shall be necessary to continue the qualification of this Agreement, the Intercreditor Agreement or any Liquidity Facility (including any supplemental agreement) under the Trust Indenture Act or under any similar Federal statute hereafter enacted, and to add to this Agreement, the Intercreditor Agreement or any Liquidity Facility such other provisions as may be expressly permitted by the Trust Indenture Act, excluding, however, the provisions referred to in Section 316(a)(2) of the Trust Indenture Act as in effect at the date as of which this Agreement was executed or any corresponding provision in any similar Federal statute hereafter enacted; or (g) to evidence and provide for the acceptance of appointment under this Agreement, the Intercreditor Agreement or any Liquidity Facility by a successor Trustee and to add to or change any of the provisions of this Agreement, the Intercreditor Agreement or any Liquidity Facility as shall be necessary to provide for or facilitate the administration of the Trust, pursuant to the requirements of Section 7.10; or (h) to provide the information required under Section 7.12 and Section 12.04 as to the Trustee; or (i) to make any other amendments or modifications hereto, provided, however, that such amendments or modifications shall apply to Certificates to be thereafter issued; 62 56 provided, however, that no such supplemental agreement shall adversely affect the status of any Trust as a grantor trust under Subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as amended, for U.S. federal income tax purposes. Section 9.02. Supplemental Agreements with Consent of Certificateholders. With respect to the Trust and the Certificates, with the consent of the Certificateholders (including consents obtained in connection with a tender offer or exchange offer for the Certificates) evidencing Fractional Undivided Interests aggregating not less than a majority in interest in such Trust, by Direction of said Certificateholders delivered to the Company and the Trustee, the Company may (with the consent of the Owner Trustees, if any, relating to the Certificates, which consent shall not be unreasonably withheld), but shall not be obligated to, and the Trustee (subject to Section 9.03) shall, enter into an agreement or agreements supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement, the Intercreditor Agreement, the Escrow Agreement, the Deposit Agreement, the Note Purchase Agreement or any Liquidity Facility to the extent applicable to such Certificateholders or of modifying in any manner the rights and obligations of such Certificateholders under this Agreement, the Intercreditor Agreement, the Escrow Agreement, the Deposit Agreement, the Note Purchase Agreement or any Liquidity Facility; provided, however, that no such agreement shall, without the consent of the Certificateholder of each Outstanding Certificate affected thereby: (a) reduce in any manner the amount of, or delay the timing of, any receipt by the Trustee of payments on the Equipment Notes held in such Trust or distributions that are required to be made herein on any Certificate, or change any date of payment on any Certificate, or change the place of payment where, or the coin or currency in which, any Certificate is payable, or impair the right to institute suit for the enforcement of any such payment or distribution on or after the Regular Distribution Date or Special Distribution Date applicable thereto; or (b) permit the disposition of any Equipment Note included in the Trust Property of such Trust except as permitted by this Agreement, or otherwise deprive such Certificateholder of the benefit of the ownership of the Equipment Notes in such Trust; or (c) alter the priority of distributions specified in the Intercreditor Agreement in a manner materially adverse to the interests of the Certificateholders; or (d) reduce the specified percentage of the aggregate Fractional Undivided Interests of such Trust that is required for any such supplemental agreement, or reduce such specified percentage required for any waiver (of compliance with certain 63 57 provisions of this Agreement or certain defaults hereunder and their consequences) provided for in this Agreement; or (e) modify any of the provisions of this Section 9.02 or Section 6.05, except to increase any such percentage or to provide that certain other provisions of this Agreement cannot be modified or waived without the consent of the Certificateholder of each Certificate affected thereby; or (f) adversely affect the status of any Trust as a grantor trust under Subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as amended, for U.S. federal income tax purposes. It shall not be necessary for any Direction of such Certificateholders under this Section 9.02 to approve the particular form of any proposed supplemental agreement, but it shall be sufficient if such Direction shall approve the substance thereof. Section 9.03. Documents Affecting Immunity or Indemnity. If in the opinion of the Trustee any document required to be executed by it pursuant to the terms of Section 9.01 or 9.02 affects any interest, right, duty, immunity or indemnity in favor of the Trustee under this Agreement or any Trust Supplement, the Trustee may in its discretion decline to execute such document. Section 9.04. Execution of Supplemental Agreements. In executing, or accepting the additional trusts created by, any supplemental agreement permitted by this Article or the modifications thereby of the trusts created by this Agreement, the Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental agreement is authorized or permitted by this Agreement. Section 9.05. Effect of Supplemental Agreements. Upon the execution of any agreement supplemental to this Agreement under this Article, this Agreement shall be modified in accordance therewith, and such supplemental agreement shall form a part of this Agreement for all purposes; and every Certificateholder theretofore or thereafter authenticated and delivered hereunder shall be bound thereby to the extent applicable to such series. Section 9.06. Conformity with Trust Indenture Act. Every supplemental agreement executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. Section 9.07. Reference in Certificates to Supplemental Agreements. Certificates authenticated and delivered after the execution of any supplemental agreement 64 58 pursuant to this Article may bear a notation in form approved by the Trustee as to any matter provided for in such supplemental agreement; and, in such case, suitable notation may be made upon Outstanding Certificates after proper presentation and demand. ARTICLE X AMENDMENTS TO INDENTURE AND NOTE DOCUMENTS Section 10.01. Amendments and Supplements to Indenture and Other Note Documents. In the event that the Trustee, as holder (or beneficial owner through the Subordination Agent) of any Equipment Notes (or as a prospective purchaser of any Postponed Notes) in trust for the benefit of the Certificateholders or as Controlling Party under an Intercreditor Agreement, receives (directly or indirectly through the Subordination Agent) a request for a consent to any amendment, modification, waiver or supplement under any Indenture, other Note Document or any other related document, which request would require the consent of Certificateholders under Section 9.02 hereof, the Trustee shall forthwith send a notice of such proposed amendment, modification, waiver or supplement to each Certificateholder registered on the Register as of the date of such notice. The Trustee shall request from the Certificateholders a Direction as to (a) whether or not to take or refrain from taking (or direct the Subordination Agent to take or refrain from taking) any action which a holder of (or, with respect to Postponed Notes, a prospective purchaser of) such Equipment Note or a Controlling Party has the option to direct, (b) whether or not to give or execute (or direct the Subordination Agent to give or execute) any waivers, consents, amendments, modifications or supplements as a holder of (or, with respect to Postponed Notes, a prospective purchaser of) such Equipment Note or as Controlling Party and (c) how to vote (or direct the Subordination Agent to vote) any Equipment Note (or, with respect to a Postponed Note, its commitment to acquire such Postponed Note) if a vote has been called for with respect thereto. Provided such a request for Certificateholder Direction shall have been made, in directing any action or casting any vote or giving any consent as the holder of any Equipment Note (or in directing the Subordination Agent in any of the foregoing), (i) other than as Controlling Party, the Trustee shall vote for or give consent to any such action with respect to such Equipment Note (or Postponed Note) in the same proportion as that of (A) the aggregate face amounts of all Certificates actually voted in favor of or for giving consent to such action by such Direction of Certificateholders to (B) the aggregate face amount of all Outstanding Certificates and (ii) as Controlling Party, the Trustee shall vote as directed in such Certificateholder Direction by the Certificateholders evidencing a Fractional Undivided Interest aggregating not less than a majority in interest in the Trust. For purposes of the immediately preceding sentence, a Certificate shall have been "actually voted" if the Holder of such Certificate has delivered to the Trustee an instrument evidencing such Holder's consent to such Direction prior to one Business Day before the Trustee directs such action or casts such vote or gives such consent. Notwithstanding the foregoing, but 65 59 subject to Section 6.04 and any Intercreditor Agreement, the Trustee may, with respect to the Certificates, in its own discretion and at its own direction, consent and notify the relevant Loan Trustee of such consent (or direct the Subordination Agent to consent and notify the Loan Trustee of such consent) to any amendment, modification, waiver or supplement under any related Indenture or any other related Note Document if an Event of Default hereunder shall have occurred and be continuing or if such amendment, modification, waiver or supplement will not materially adversely affect the interests of the Certificateholders. ARTICLE XI TERMINATION OF TRUSTS Section 11.01. Termination of the Trust. The respective obligations and responsibilities of the Company and the Trustee shall terminate upon the earlier of (A) the completion of the assignment, transfer and discharge described in the first sentence of the immediately following paragraph and (B) distribution to all Certificateholders and the Trustee of all amounts required to be distributed to them pursuant to this Agreement and the disposition of all property held as part of the Trust Property; provided, however, that in no event shall the Trust continue beyond one hundred ten (110) years following the date of the execution of this Agreement. Upon the earlier of (i) the first Business Day following June 30, 1999, or, if later, the fifth Business Day following the Delivery Period Termination Date and (ii) the fifth Business Day following the date on which a Triggering Event occurs (such date, the "Transfer Date"), or, if later, the date on which all of the conditions set forth in the immediately following sentence have been satisfied, the Trustee is hereby directed (subject only to the immediately following sentence) to, and the Company shall direct the institution that will serve as the Related Trustee under the Related Pass Through Trust Agreement to, execute and deliver the Assignment and Assumption Agreement, pursuant to which the Trustee shall assign, transfer and deliver all of the Trustee's right, title and interest to the Trust Property to the Related Trustee under the Related Pass Through Trust Agreement. The Trustee and the Related Trustee shall execute and deliver the Assignment and Assumption Agreement upon the satisfaction of the following conditions: (i) The Trustee, the Related Trustee and each of the Rating Agencies then rating the Certificates shall have received an Officer's Certificate and an Opinion of Counsel dated the date of the Assignment and Assumption Agreement and each satisfying the requirements of Section 1.02, which Opinion of Counsel shall be substantially to the effect set forth below and may be relied upon by the Beneficiaries (as defined in the Assignment and Assumption Agreement): 66 60 (a) upon the execution and delivery thereof by the parties thereto in accordance with the terms of this Agreement and the Related Pass Through Trust Agreement, the Assignment and Assumption Agreement will constitute the valid and binding obligation of each of the parties thereto enforceable against each such party in accordance with its terms; (b) upon the execution and delivery of the Assignment and Assumption Agreement in accordance with the terms of this Agreement and the Related Pass Through Trust Agreement, each of the Certificates then Outstanding will be entitled to the benefits of the Related Pass Through Trust Agreement; (c) the Related Trust is not required to be registered as an investment company under the Investment Company Act of 1940, as amended; (d) the Related Pass Through Trust Agreement constitutes the valid and binding obligation of the Company enforceable against the Company in accordance with its terms; and (e) neither the execution and delivery of the Assignment and Assumption Agreement in accordance with the terms of this Agreement and the Related Pass Through Trust Agreement, nor the consummation by the parties thereto of the transactions contemplated to be consummated thereunder on the date thereof, will violate any law or governmental rule or regulation of the State of New York or the United States of America known to such counsel to be applicable to the transactions contemplated by the Assignment and Assumption Agreement. (ii) The Trustee and the Company shall have received (x) a copy of the articles of incorporation and bylaws of the Related Trustee certified as of the Transfer Date by the Secretary or Assistant Secretary of such institution and (y) a copy of the filing (including all attachments thereto) made by the institution serving as the Related Trustee with the Office of the Superintendent, State of New York Banking Department for the qualification of the Related Trustee under Section 131(3) of the New York Banking Law. Upon the execution of the Assignment and Assumption Agreement by the parties thereto, the Trust shall be terminated, the Certificateholders shall receive beneficial interests in the Related Trust in exchange for their interests in the Trust equal to their respective beneficial interests in the Trust, and the Outstanding Certificates representing Fractional Undivided Interests in the Trust shall be deemed for all purposes of this Agreement and the Related Pass Through Trust Agreement, without further signature or action of any party or 67 61 Certificateholder, to be certificates representing the same fractional undivided interests in the Related Trust and its trust property. By acceptance of its Certificate, each Certificateholder consents to such assignment, transfer and delivery of the Trust Property to the trustee of the Related Trust upon the execution and delivery of the Assignment and Assumption Agreement. In connection with the occurrence of the event set forth in clause (B) above, notice of such termination, specifying the Distribution Date upon which the Certificateholders may surrender their Certificates to the Trustee for payment of the final distribution and cancellation, shall be mailed promptly by the Trustee to Certificateholders not earlier than the 60th day and not later than the 15th day next preceding such final Distribution Date specifying (A) the Distribution Date upon which the proposed final payment of the Certificates will be made upon presentation and surrender of Certificates at the office or agency of the Trustee therein specified, (B) the amount of any such proposed final payment, and (c) that the Record Date otherwise applicable to such Distribution Date is not applicable, payments being made only upon presentation and surrender of the Certificates at the office or agency of the Trustee therein specified. The Trustee shall give such notice to the Registrar at the time such notice is given to Certificateholders. Upon presentation and surrender of the Certificates in accordance with such notice, the Trustee shall cause to be distributed to Certificateholders such final payments. In the event that all of the Certificateholders shall not surrender their Certificates for cancellation within six months after the date specified in the above-mentioned written notice, the Trustee shall give a second written notice to the remaining Certificateholders to surrender their Certificates for cancellation and receive the final distribution with respect thereto. No additional interest shall accrue on the Certificates after the Distribution Date specified in the first written notice. In the event that any money held by the Trustee for the payment of distributions on the Certificates shall remain unclaimed for two years (or such lesser time as the Trustee shall be satisfied, after sixty days' notice from the Company, is one month prior to the escheat period provided under applicable law) after the final distribution date with respect thereto, the Trustee shall pay to each Loan Trustee the appropriate amount of money relating to such Loan Trustee and shall give written notice thereof to the related Owner Trustees, the Owner Participants and the Company. ARTICLE XII MISCELLANEOUS PROVISIONS Section 12.01. Limitation on Rights of Certificateholders. The death or incapacity of any Certificateholder shall not operate to terminate this Agreement or the Trust, nor entitle such Certificateholder's legal representatives or heirs to claim an accounting or to 68 62 take any action or commence any proceeding in any court for a partition or winding up of the Trust, nor otherwise affect the rights, obligations, and liabilities of the parties hereto or any of them. Section 12.02. Liabilities of Certificateholders. Neither the existence of the Trust nor any provision in this Agreement is intended to or shall limit the liability the Certificateholders would otherwise incur if the Certificateholders owned Trust Property as co-owners, or incurred any obligations of the Trust, directly rather than through the Trust. Section 12.03. Registration of Equipment Notes in Name of Subordination Agent. If the Trust is party to the Intercreditor Agreement, the Trustee agrees that all Equipment Notes to be purchased by such Trust shall be issued in the name of the Subordination Agent under the Intercreditor Agreement or its nominee and held by such Subordination Agent in trust for the benefit of the Certificateholders, or, if not so held, such Subordination Agent or its nominee shall be reflected as the owner of such Equipment Notes in the register of the issuer of such Equipment Notes. Section 12.04. Notices. (a) Unless otherwise specifically provided herein, all notices required under the terms and provisions of this Agreement shall be in English and in writing, and any such notice may be given by United States mail, courier service or telecopy, and any such notice shall be effective when delivered or received or, if mailed, three days after deposit in the United States mail with proper postage for ordinary mail prepaid, (i) if to the Company: Atlas Air, Inc. 538 Commons Drive Golden, CO 80401 Attention: Chief Financial Officer Facsimile: (303) 526-5051 (ii) if to the Trustee: Wilmington Trust Company One Rodney Square 1100 N. Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Department Facsimile: (302) 651-8882 (b) The Company or the Trustee, by notice to the other, may designate additional or different addresses for subsequent notices or communications. 69 63 (c) Any notice or communication to Certificateholders shall be mailed by first-class mail to the addresses for Certificateholders shown on the Register kept by the Registrar and to addresses filed with the Trustee for Certificate Owners. Failure so to mail a notice or communication or any defect in such notice or communication shall not affect its sufficiency with respect to other Certificateholders or Certificate Owners. (d) If a notice or communication is mailed in the manner provided above within the time prescribed, it is conclusively presumed to have been duly given, whether or not the addressee receives it. (e) If the Company mails a notice or communication to the Certificateholders, it shall mail a copy to the Trustee and to each Paying Agent for such series at the same time. (f) Notwithstanding the foregoing, all communications or notices to the Trustee shall be deemed to be given only when received by a Responsible Officer of the Trustee. (g) The Trustee shall promptly furnish the Company with a copy of any demand, notice or written communication received by the Trustee hereunder from any Certificateholder, Owner Trustee or Loan Trustee. Section 12.05. Governing Law. THIS AGREEMENT HAS BEEN DELIVERED IN THE STATE OF DELAWARE AND, TOGETHER WITH THE CERTIFICATES, SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. Section 12.06. Severability of Provisions. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions, or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement or the Trust, or of the Certificates or the rights of the Certificateholders thereof. Section 12.07. Trust Indenture Act Controls. Upon the occurrence of any Registration Event, this Agreement shall become subject to the provisions of the Trust Indenture Act and shall, to the extent applicable, be governed by such provisions. From and after any Registration Event, if any provision of this Agreement limits, qualifies or conflicts 70 64 with another provision which is required to be included in this Agreement by the Trust Indenture Act, the required provision shall control. Section 12.08. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. Section 12.09. Successors and Assigns. All covenants, agreements, representations and warranties in this Agreement by the Trustee and the Company shall bind and, to the extent permitted hereby, shall inure to the benefit of and be enforceable by their respective successors and assigns, whether so expressed or not. Section 12.10. Benefits of Agreement. Nothing in this Agreement or in the Certificates, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, and the Certificateholders, any benefit or any legal or equitable right, remedy or claim under this Agreement. Section 12.11. Legal Holidays. In any case where any Regular Distribution Date or Special Distribution Date relating to any Certificate shall not be a Business Day, then (notwithstanding any other provision of this Agreement) payment need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on such Regular Distribution Date or Special Distribution Date, and no interest shall accrue during the intervening period. Section 12.12. Counterparts. For the purpose of facilitating the execution of this Agreement and for other purposes, this Agreement may be executed simultaneously in any number of counterparts, each of which counterparts shall be deemed to be an original, and all of which counterparts shall constitute but one and the same instrument. Section 12.13. Communication by Certificateholders with Other Certificateholders. Certificateholders may communicate with other Certificateholders with respect to their rights under this Agreement or the Certificates pursuant to Section 312(b) of the Trust Indenture Act. The Company, the Trustee and any and all other persons benefitted by this Agreement shall have the protection afforded by Section 312(c) of the Trust Indenture Act. Section 12.14. Intention of Parties. The parties hereto intend that each Trust be classified for U.S. federal income tax purposes as a grantor trust under Subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as amended, and not as a trust or association taxable as a corporation or as a partnership. The Trustee agrees to hold all assets of each Trust for investment purposes only. Each Certificateholder and Investor, by its acceptance of its Certificate or a beneficial interest therein, agrees to treat the Trust as a 71 65 grantor trust for all U.S. federal, state and local income tax purposes. The powers granted and obligations undertaken pursuant to this Agreement shall be so construed so as to further such intent. 72 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed by their respective officers hereunto duly authorized as of the day and year first written above. ATLAS AIR, INC. By: /s/ RICHARD H. SHUYLER ----------------------------------- Name: Richard H. Shuyler Title: Chief Financial Officer, Sr. Vice Pres., Finance; and Corporate Treasurer WILMINGTON TRUST COMPANY, as Trustee By: /s/ JAMES P. LAWLER ----------------------------------- Name: JAMES P. LAWLER Title: Vice President 73 EXHIBIT A FORM OF CERTIFICATE REGISTERED No. ______________ [THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS CERTIFICATE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT; (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFICATE WAS HELD BY ATLAS AIR, INC., THE TRUSTEE OR ANY AFFILIATE OF ANY OF SUCH PERSONS RESELL OR OTHERWISE TRANSFER THIS CERTIFICATE EXCEPT (A) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (B) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING $100,000 OR MORE AGGREGATE PRINCIPAL AMOUNT OF SUCH CERTIFICATE THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS CERTIFICATE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES 74 A-2 ACT (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT; AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS CERTIFICATE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS CERTIFICATE WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFICATE WAS HELD BY ATLAS AIR, INC., THE TRUSTEE OR ANY AFFILIATE OF ANY OF SUCH PERSONS THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE PASS THROUGH TRUST AGREEMENT CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS CERTIFICATE IN VIOLATION OF THE FOREGOING RESTRICTIONS.]* [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. - ----------------------------------- * Not to be included on the face of the Permanent Offshore Global Certificate. 75 A-3 TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE PASS THROUGH TRUST AGREEMENT REFERRED TO HEREIN.* [BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT EITHER (A) NO PLAN ASSETS HAVE BEEN USED TO PURCHASE THIS CERTIFICATE OR (B) THE PURCHASE AND HOLDING OF THIS CERTIFICATE ARE EXEMPT FROM THE PROHIBITED TRANSACTION RESTRICTIONS OF ERISA AND THE CODE PURSUANT TO ONE OR MORE PROHIBITED TRANSACTION STATUTORY OR ADMINISTRATIVE EXEMPTIONS.] - ------------------------- * To be included on the face of each Global Certificate. 76 A-4 [GLOBAL CERTIFICATE]* ATLAS AIR 1998-1C PASS THROUGH TRUST 8.01% Atlas Air [Initial] [Exchange] Pass Through Certificate Series 1998-1C Final Distribution Date: January 2, 2010 evidencing a fractional undivided interest in a trust, the property of which includes certain equipment notes each secured by an Aircraft leased to Atlas Air, Inc. $____________ Fractional Undivided Interest representing .________% of the Trust per $1,000 face amount THIS CERTIFIES THAT ______________________, for value received, is the registered owner of a $__________ _ (________________ dollars) Fractional Undivided Interest in the Atlas Air 1998-1C Pass Through Trust (the "Trust") created pursuant to a Pass Through Trust Agreement, dated as of February 9, 1998 (the "Agreement"), between Wilmington Trust Company (the "Trustee") and Atlas Air, Inc., a corporation incorporated under Delaware law (the "Company"), a summary of certain of the pertinent provisions of which is set forth below. To the extent not otherwise defined herein, the capitalized terms used herein have the meanings assigned to them in the Agreement. This Certificate is one of the duly authorized Certificates designated as "8.01% Atlas Air [Initial] [Exchange] Pass Through Certificates Series 1998- 1C" (herein called the "Certificates"). This Certificate is issued under and is subject to the terms, provisions, and conditions of the Agreement. By virtue of its acceptance hereof the Certificateholder of this Certificate assents to and agrees to be bound by the provisions of the Agreement and the Intercreditor Agreement. The property of the Trust includes certain Equipment Notes and all rights of the Trust to receive payments under the Intercreditor Agreement and the Liquidity Facilities (the "Trust Property"). Each issue of the Equipment Notes is secured by, among other things, a security interest in the Aircraft leased to or owned by the Company. The Certificates represent fractional undivided interests in the Trust and the Trust Property, and have no rights, benefits or interest in respect of any assets or property other than the Trust Property. Subject to and in accordance with the terms of the Agreement and the Intercreditor Agreement, from and to the extent of funds then available to the Trustee, there - ------------------------- * To be included on the face of each Global Certificate. 77 A-5 will be distributed on each January 2 and July 2 (a "Regular Distribution Date"), commencing on July 2, 1998, to the Person in whose name this Certificate is registered at the close of business on the 15th day preceding the Regular Distribution Date, an amount in respect of the Scheduled Payments on the Equipment Notes due on such Regular Distribution Date, the receipt of which has been confirmed by the Trustee, equal to the product of the percentage interest in the Trust evidenced by this Certificate and an amount equal to the sum of such Scheduled Payments. Subject to and in accordance with the terms of the Agreement and the Intercreditor Agreement, in the event that Special Payments on the Equipment Notes are received by the Trustee, from funds then available to the Trustee, there shall be distributed on the applicable Special Distribution Date, to the Person in whose name this Certificate is registered at the close of business on the 15th day preceding the Special Distribution Date, an amount in respect of such Special Payments on the Equipment Notes, the receipt of which has been confirmed by the Trustee, equal to the product of the percentage interest in the Trust evidenced by this Certificate and an amount equal to the sum of such Special Payments so received. If a Regular Distribution Date or Special Distribution Date is not a Business Day, distribution shall be made on the immediately following Business Day with the same force and effect as if made on such Regular Distribution Date or Special Distribution Date and no interest shall accrue during the intervening period. The Trustee shall mail notice of each Special Payment and the Special Distribution Date therefor to the Certificateholder of this Certificate. [The Holder of this Certificate is entitled to the benefits of the Registration Rights Agreement, dated as of February 9, 1998, among the Company, the Trustee and the Placement Agents named therein (the "Registration Rights Agreement"). In the event that neither the consummation of the Exchange Offer nor the declaration by the Commission of a Shelf Registration to be effective (a "Registration Event") occurs on or prior to the 180th day after the date of the issuance of the Certificates, the interest rate per annum borne by the Equipment Notes shall be increased by 0.50%, from and including August 9, 1998, to but excluding the date on which a Registration Event occurs. In the event that the Shelf Registration Statement ceases to be effective at any time during the period specified by the Registration Rights Agreement for more than 60 days, whether or not consecutive, during any 12-month period, the interest rate per annum borne by the Equipment Notes shall be increased by 0.50% from the 61st day of the applicable 12-month period such Shelf Registration Statement ceases to be effective until such time as the Shelf Registration Statement again becomes effective.]* Except as otherwise provided in the Agreement and notwithstanding the above, the final distribution on this Certificate will be made after notice mailed by the Trustee of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Trustee specified in such notice. - ------------------------- * To be included only on each Initial Certificate. 78 A-6 THE AGREEMENT AND THIS CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed. Dated: [__________ __], 1998 ATLAS AIR 1998-1C PASS THROUGH TRUST By: WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Trustee Attest: By: --------------------------- Name: Title: - -------------------- Authorized Signature 79 A-7 [FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Certificates referred to in the within-mentioned Agreement. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Trustee By: ------------------------------ Authorized Officer 80 A-8 [REVERSE OF CERTIFICATE] The Certificates do not represent a direct obligation of, or an obligation guaranteed by, or an interest in, the Company or the Trustee or any of their affiliates. The Certificates are limited in right of payment, all as more specifically set forth on the face hereof and in the Agreement. All payments or distributions made to Certificateholders under the Agreement shall be made only from the Trust Property and only to the extent that the Trustee shall have sufficient income or proceeds from the Trust Property to make such payments in accordance with the terms of the Agreement. Each Certificateholder of this Certificate, by its acceptance hereof, agrees that it will look solely to the income and proceeds from the Trust Property to the extent available for distribution to such Certificateholder as provided in the Agreement. This Certificate does not purport to summarize the Agreement and reference is made to the Agreement for information with respect to the interests, rights, benefits, obligations, proceeds, and duties evidenced hereby. A copy of the Agreement may be examined during normal business hours at the principal office of the Trustee, and at such other places, if any, designated by the Trustee, by any Certificateholder upon request. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Certificateholders under the Agreement at any time by the Company and the Trustee with the consent of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust. Any such consent by the Certificateholder of this Certificate shall be conclusive and binding on such Certificateholder and upon all future Certificateholders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Certificateholders of any of the Certificates. As provided in the Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registrable in the Register upon surrender of this Certificate for registration of transfer at the offices or agencies maintained by the Trustee in its capacity as Registrar, or by any successor Registrar, in the Borough of Manhattan, the City of New York, duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Trustee and the Registrar duly executed by the Certificateholder hereof or such Certificateholder's attorney duly authorized in writing, and thereupon one or more new Certificates of authorized denominations evidencing the same aggregate Fractional Undivided Interest in the Trust will be issued to the designated transferee or transferees. 81 A-9 The Certificates are issuable only as registered Certificates without coupons in minimum denominations of [$100,000]* [$1,000]** Fractional Undivided Interest and integral multiples of $1,000 in excess thereof [except that one Certificate may be in a denomination of less than $100,000]*. As provided in the Agreement and subject to certain limitations therein set forth, the Certificates are exchangeable for new Certificates of authorized denominations evidencing the same aggregate Fractional Undivided Interest in the Trust, as requested by the Certificateholder surrendering the same. No service charge will be made for any such registration of transfer or exchange, but the Trustee shall require payment by the Holder of a sum sufficient to cover any tax or governmental charge payable in connection therewith. The Trustee, the Registrar, and any agent of the Trustee or the Registrar may treat the person in whose name this Certificate is registered as the owner hereof for all purposes, and neither the Trustee, the Registrar, nor any such agent shall be affected by any notice to the contrary. The obligations and responsibilities created by the Agreement and the Trust created thereby shall terminate upon the distribution to Certificateholders of all amounts required to be distributed to them pursuant to the Agreement and the disposition of all property held as part of the Trust Property. - ------------------------- * To be included only on each Initial Certificate. ** To be included only on each Exchange Certificate. 82 A-10 FORM OF TRANSFER NOTICE FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s) and transfer(s) unto Insert Taxpayer Identification No. __________________________________ __________________________________ please print or typewrite name and address including zip code of assignee __________________________________ the within Certificate and all rights thereunder, hereby irrevocably constituting and appointing __________________________________ attorney to transfer said Certificate on the books of the Trustee with full power of substitution in the premises. [THE FOLLOWING PROVISION TO BE INCLUDED ON ALL CERTIFICATES EXCEPT PERMANENT OFFSHORE GLOBAL AND OFFSHORE PHYSICAL CERTIFICATES] In connection with any transfer of this Certificate occurring prior to the date that is the earlier of the date of an effective Registration Statement or February 9, 2000, the undersigned confirms that without utilizing any general solicitation or general advertising that: [Check One] [ ] (a) this Certificate is being transferred in compliance with the exemption from registration under the Securities Act of 1933, as amended, provided by Rule 144A thereunder. or [ ] (b) this Certificate is being transferred other than in accordance with (a) above and documents are being furnished that comply with the conditions of transfer set forth in this Certificate and the Agreement. If neither of the foregoing boxes is checked, the Trustee or other Registrar shall not be obligated to register this Certificate in the name of any Person other than the Holder hereof 83 A-11 unless and until the conditions to any such transfer of registration set forth herein and in Section 3.06 of the Agreement shall have been satisfied. Date: [Name of Transferor] ------------------------------ --------------------------------------- NOTE: The signature must correspond with the name as written upon the face of the within-mentioned instrument in every particular, without alteration or any change whatsoever. Signature Guarantee: ------------------------- TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Certificate for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, as amended, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: ----------------------------- --------------------------------------- NOTE: To be executed by an executive officer. 84 EXHIBIT B FORM OF CERTIFICATE FOR UNLEGENDED CERTIFICATES [DATE] Wilmington Trust Company One Rodney Square 1100 N. Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Re: Atlas Air 1998-1C Pass Through Trust, Class C Pass Through Trust Certificates (the "Certificates") Dear Sirs: This letter relates to U.S. $__________ Fractional Undivided Interest of Certificates represented by a Certificate (the "Legended Certificate") which bears a legend outlining restrictions upon transfer of such Legended Certificate. Pursuant to Section 3.01 of the Pass Through Trust Agreement relating to the Certificates dated as of February 9, 1998 (the "Trust Agreement"), between Atlas Air, Inc. ("Atlas") and you, we hereby certify that we are (or we will hold such securities on behalf of) a person outside the United States to whom the Certificates could be transferred in accordance with Rule 904 of Regulation S promulgated under the U.S. Securities Act of 1933, as amended. Accordingly, you are hereby requested to exchange the legended certificate for an unlegended certificate representing an identical principal amount of Certificates, all in the manner provided for in the Trust Agreement. You and Atlas are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Certificateholder] By: --------------------------------- Authorized Signature 85 EXHIBIT C FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S [DATE] Wilmington Trust Company One Rodney Square 1100 N. Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Re: Atlas Air 1998-1C Pass Through Trust (the "Trust"), 8.01% Atlas Air Pass Through Certificates Series 1998-1C (the "Certificates") Sirs: In connection with our proposed sale of $_______ Fractional Undivided Interest of the Certificates, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the Securities Act of 1933, as amended, and, accordingly, we represent that: (1) the offer of the Certificates was not made to a person in the United States; (2) either (a) at the time the buy order was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States or (b) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been pre- arranged with a buyer in the United States; (3) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; and 86 C-2 (4) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act. In addition, if the sale is made during a restricted period and the provisions of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are applicable thereto, we confirm that such sale has been made in accordance with the applicable provisions of Rule 903(c)(3) or Rule 904(c)(1), as the case may be. You and Atlas Air, Inc. are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Transferor] By: ------------------------- Authorized Signature 87 EXHIBIT D FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS TO NON-QIB ACCREDITED INVESTORS [DATE] Wilmington Trust Company One Rodney Square 1100 N. Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Re: Atlas Air 1998-1C Pass-Through Trust (the "Trust"), 8.01% Atlas Air Pass Through Certificates Series 1998-1C (the "Certificates") Dear Sirs: In connection with our proposed purchase of $_______________ aggregate principal amount of the Certificates, we confirm that: 1. We understand that any subsequent transfer of the Certificates is subject to certain restrictions and conditions set forth in the Pass Through Trust Agreement dated as of February 9, 1998 relating to the Certificates (the "Pass Through Trust Agreement") and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Certificates except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the "Securities Act"). 2. We understand that the Certificates have not been registered under the Securities Act, and that the Certificates may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell any Certificate, we will do so only (A) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (B) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes to you and Continental Airlines, Inc., a signed letter substantially in the form of this letter, (C) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (D) pursuant to the exemption from registration provided by Rule 144 under the Securities Act, or (E) pursuant to an effective registration statement under 88 D-2 the Securities Act, and we further agree to provide to any person purchasing any of the Certificates from us a notice advising such purchaser that resales of the Notes are restricted as stated herein. We further understand that the Certificates purchased by us will bear a legend to the foregoing effect. 3. We understand that, on any proposed resale of any Certificates, we will be required to furnish to you and Atlas Air, Inc. such certifications, legal opinions and other information as you and Atlas Air, Inc. may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Certificates purchased by us will bear a legend to the foregoing effect. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Certificates and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Certificates purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You and Atlas Air, Inc. are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Very truly yours, [Name of Transferor] By: --------------------------- Authorized Signature 89 EXHIBIT E FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT Atlas Air Pass Through Trust 1998-1C ASSIGNMENT AND ASSUMPTION AGREEMENT, dated ____________, 199_ (the "Assignment Agreement"), between Wilmington Trust Company, a Delaware banking corporation ("WTC"), not in its individual capacity except as expressly provided herein, but solely as trustee under the Pass Through Trust Agreement dated as of February 9, 1998 (as amended or modified from time to time, the "Agreement"), in respect of the Atlas Air Pass Through Trust 1998-1C-O (the "Assignor"), and Wilmington Trust Company, a Delaware banking corporation, not in its individual capacity except as expressly provided herein, but solely as trustee under the Pass Through Trust Agreement dated as of February 9, 1998 (as amended or modified from time to time, the "New Agreement"), in respect of the Atlas Air Pass Through Trust 1998-1C-S (the "Assignee"). W I T N E S S E T H: WHEREAS, the parties hereto desire to effect on the date hereof (the "Transfer Date") (a) the transfer by the Assignor to the Assignee of all of the right, title and interest of the Assignor in, under and with respect to, among other things, the Trust Property and each of the documents listed in Schedule I hereto (the "Scheduled Documents") and (b) the assumption by the Assignee of the obligations of the Assignor (i) under the Scheduled Documents and (ii) in respect of the Applicable Certificates issued under the Agreement; and WHEREAS, the Scheduled Documents permit such transfer upon satisfaction of certain conditions heretofore or concurrently herewith being complied with; NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements herein contained, the parties hereto do hereby agree as follows (capitalized terms used herein without definition having the meaning ascribed thereto in the Agreement): 1. Assignment. The Assignor does hereby sell, assign, convey, transfer and set over unto the Assignee as of the Transfer Date all of its present and future right, title and interest in, under and with respect to the Trust Property and the Scheduled Documents and each other contract, agreement, document or instrument relating to the Trust Property or the Scheduled Documents (such other contracts, agreements, documents or instruments, together with the Scheduled Documents, to be referred to as the "Assigned Documents"), and any proceeds therefrom, together with all documents and instruments evidencing any of such right, title and interest. 90 E-2 2. Assumption. The Assignee hereby assumes for the benefit of the Assignor and each of the parties listed in Schedule II hereto (collectively, the "Beneficiaries") all of the duties and obligations of the Assignor, whenever accrued, pursuant to the Assigned Documents and hereby confirms that it shall be deemed a party to each of the Assigned Documents to which the Assignor is a party and shall be bound by all the terms thereof (including the agreements and obligations of the Assignor set forth therein) as if therein named as the Assignor. Further, the Assignee hereby assumes for the benefit of the Assignor and the Beneficiaries all of the duties and obligations of the Assignor under the Outstanding Applicable Certificates and hereby confirms that the Applicable Certificates representing Fractional Undivided Interests under the Agreement shall be deemed for all purposes of the Agreement and the New Agreement to be certificates representing the same fractional undivided interests under the New Agreement equal to their respective beneficial interests in the trust created under the Agreement. 3. Effectiveness. This Assignment Agreement shall be effective upon the execution and delivery hereof by the parties hereto, and each Applicable Certificateholder, by its acceptance of its Applicable Certificate or a beneficial interest therein, agrees to be bound by the terms of this Assignment Agreement. 4. Payments. The Assignor hereby covenants and agrees to pay over to the Assignee, if and when received following the Transfer Date, any amounts (including any sums payable as interest in respect thereof) paid to or for the benefit of the Assignor that, under Section 1 hereof, belong to the Assignee. 5. Further Assurances. The Assignor shall, at any time and from time to time, upon the request of the Assignee, promptly and duly execute and deliver any and all such further instruments and documents and take such further action as the Assignee may reasonably request to obtain the full benefits of this Assignment Agreement and of the right and powers herein granted. The Assignor agrees to deliver any Applicable Certificates, and all Trust Property, if any, then in the physical possession of the Assignor, to the Assignee. 6. Representations and Warranties. (a) The Assignee represents and warrants to the Assignor and each of the Beneficiaries that: (i) it has all requisite power and authority and legal right to enter into and carry out the transactions contemplated hereby and to carry out and perform the obligations of the "Pass Through Trustee" under the Assigned Documents; (ii) on and as of the date hereof, the representations and warranties of the Assignee set forth in Section 7.15 of the Agreement and Section 7.15 of the New Agreement are true and correct. 91 E-3 (b) The Assignor represents and warrants to the Assignee that: (i) it is duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has the full trust power, authority and legal right under the laws of the State of Delaware and the United States pertaining to its trust and fiduciary powers to execute and deliver this Assignment Agreement; (ii) the execution and delivery by it of this Assignment Agreement and the performance by it of its obligations hereunder have been duly authorized by it and will not violate its articles of association or by-laws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it is bound; and (iii) this Assignment Agreement constitutes the legal, valid and binding obligations of it enforceable against it in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity, whether considered in a proceeding at law or in equity. 7. GOVERNING LAW. THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK INCLUDING MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. 8. Counterparts. This Assignment Agreement may be executed in any number of counterparts, all of which together shall constitute a single instrument. It shall not be necessary that any counterpart be signed by both parties so long as each party shall sign at least one counterpart. 9. Third Party Beneficiaries. The Assignee hereby agrees, for the benefit of the Beneficiaries, that its representations, warranties and covenants contained herein are also intended to be for the benefit of each Beneficiary, and each Beneficiary shall be deemed to be an express third party beneficiary with respect thereto, entitled to enforce directly and in its own name any rights or claims it may have against such party as such beneficiary. 92 E-4 IN WITNESS WHEREOF, the parties hereto, through their respective officers thereunto duly authorized, have duly executed this Assignment Agreement as of the day and year first above written. ASSIGNOR: WILMINGTON TRUST COMPANY, not in its individual capacity except as expressly provided herein, but solely as trustee under the Pass Through Trust Agreement in respect of the Atlas Air Pass Through Trust 1998-1C-O By: ---------------------------------------- Title: ASSIGNEE: WILMINGTON TRUST COMPANY, not in its individual capacity except as expressly provided herein, but solely as trustee under the Pass Through Trust Agreement in respect of the Atlas Air Pass Through Trust 1998-1C-S By: ---------------------------------------- Title: 93 Schedule I Schedule of Assigned Documents (1) Intercreditor Agreement dated as of February 9, 1998 among the Trustee, the Other Trustees, the Liquidity Provider, the liquidity providers, if any, relating to the Certificates issued under (and as defined in) each of the Other Agreements and the Subordination Agent. (2) Escrow and Paying Agent Agreement (Class C) dated as of February 9, 1998 among the Escrow Agent, the Placement Agents, the Trustee and the Paying Agent. (3) Note Purchase Agreement dated as of February 9, 1998 among the Company, the Trustee, the Other Trustees, the Depositary, the Escrow Agent, the Paying Agent and the Subordination Agent. (4) Deposit Agreement (Class C) dated as of February 9, 1998 between the Escrow Agent and the Depositary. (5) Each of the Operative Agreements (as defined in the Participation Agreement for each Aircraft) in effect as of the Transfer Date. 94 Schedule II Schedule of Beneficiaries Wilmington Trust Company, not in its individual capacity but solely as Subordination Agent Wilmington Trust Company, not in its individual capacity but solely as Paying Agent Morgan Stanley Capital Services, Inc., as Class C Liquidity Provider Atlas Air, Inc. Morgan Stanley & Co. Incorporated, as Placement Agent BT Alex. Brown Incorporated, as Placement Agent Donaldson, Lufkin & Jenrette Securities Corporation., as Placement Agent Goldman, Sachs & Co., as Placement Agent First Security Bank, National Association, as Escrow Agent Each of the other parties to the Assigned Documents EX-10.95 9 PASS THROUGH AGREEMENT 1998-1C-S 1 EXHIBIT 10.95 EXECUTION COPY - -------------------------------------------------------------------------------- PASS THROUGH TRUST AGREEMENT Dated as of February 9, 1998 between ATLAS AIR, INC. and WILMINGTON TRUST COMPANY as Trustee $123,180,000 Atlas Air Pass Through Trust 1998-1C-S 8.01% Atlas Air 1998-1C-S Initial Pass Through Certificates 8.01% Atlas Air 1998-1C-S Exchange Pass Through Certificates - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 1.02. Compliance Certificates and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 1.03. Form of Documents Delivered to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 1.04. Directions of Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE II ORIGINAL ISSUANCE OF CERTIFICATES: ACQUISITION OF TRUST PROPERTY Section 2.01. Delivery of Documents; Delivery Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 2.02. Withdrawal of Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 2.03. Acceptance by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 2.04. Limitation of Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 ARTICLE III THE CERTIFICATES Section 3.01. Title, Form, Denomination and Execution of Certificates . . . . . . . . . . . . . . . . . . . . . 20 Section 3.02. Restrictive Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 3.03. Authentication of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 3.04. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 3.05. Book-Entry Provisions for U.S. Global Certificate and Offshore Global Certificates . . . . . . . . 25 Section 3.06. Special Transfer Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Section 3.07. Mutilated, Destroyed, Lost or Stolen Certificates . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 3.08. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 3.09. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 3.10. Temporary Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 3.11. Limitation of Liability for Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
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Page ---- ARTICLE IV DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS Section 4.01. Certificate Account and Special Payments Account . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 4.02. Distributions from Certificate Account and Special Payments Account . . . . . . . . . . . . . . . 32 Section 4.03. Statements to Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Section 4.04. Investment of Special Payment Moneys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 ARTICLE V THE COMPANY Section 5.01. Maintenance of Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Section 5.02. Consolidation, Merger, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 ARTICLE VI DEFAULT Section 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 6.02. Incidents of Sale of Equipment Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Section 6.03. Judicial Proceedings Instituted by Trustee; Trustee May Bring Suit . . . . . . . . . . . . . . . . 40 Section 6.04. Control by Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Section 6.05. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Section 6.06. Right of Certificateholders to Receive Payments Not to Be Impaired . . . . . . . . . . . . . . . . 42 Section 6.07. Certificateholders May Not Bring Suit Except Under Certain Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Section 6.08. Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Section 6.09. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 ARTICLE VII THE TRUSTEE Section 7.01. Certain Duties and Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Section 7.02. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Section 7.03. Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
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Page ---- Section 7.04. Not Responsible for Recitals or Issuance of Certificates . . . . . . . . . . . . . . . . . . . . . 45 Section 7.05. May Hold Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 7.06. Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 7.07. Compensation and Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 7.08. Corporate Trustee Required; Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Section 7.09. Resignation and Removal; Appointment of Successor . . . . . . . . . . . . . . . . . . . . . . . . 47 Section 7.10. Acceptance of Appointment by Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Section 7.11. Merger, Conversion, Consolidation or Succession to Business . . . . . . . . . . . . . . . . . . . 49 Section 7.12. Maintenance of Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Section 7.13. Money for Certificate Payments to Be Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . 51 Section 7.14. Registration of Equipment Notes in Trustee's Name . . . . . . . . . . . . . . . . . . . . . . . . 51 Section 7.15. Representations and Warranties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Section 7.16. Withholding Taxes; Information Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Section 7.17. Trustee's Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Section 7.18. Preferential Collection of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 ARTICLE VIII CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE Section 8.01. The Company to Furnish Trustee with Names and Addresses of Certificateholders . . . . . . . . . . 54 Section 8.02. Preservation of Information; Communications to Certificateholders . . . . . . . . . . . . . . . . 54 Section 8.03. Reports by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Section 8.04. Reports by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 ARTICLE IX SUPPLEMENTAL AGREEMENTS Section 9.01. Supplemental Agreements Without Consent of Certificateholders . . . . . . . . . . . . . . . . . . 55 Section 9.02. Supplemental Agreements with Consent of Certificateholders . . . . . . . . . . . . . . . . . . . . 57 Section 9.03. Documents Affecting Immunity or Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 9.04. Execution of Supplemental Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 9.05. Effect of Supplemental Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 9.06. Conformity with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Section 9.07. Reference in Certificates to Supplemental Agreements . . . . . . . . . . . . . . . . . . . . . . . 59
iv 5
Page ---- ARTICLE X AMENDMENTS TO INDENTURE AND NOTE DOCUMENTS Section 10.01. Amendments and Supplements to Indenture and Other Note Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 ARTICLE XI TERMINATION OF TRUSTS Section 11.01. Termination of the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 ARTICLE XII MISCELLANEOUS PROVISIONS Section 12.01. Limitation on Rights of Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Section 12.02. Liabilities of Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Section 12.03. Registration of Equipment Notes in Name of Subordination Agent . . . . . . . . . . . . . . . . . 63 Section 12.04. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Section 12.05. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Section 12.06. Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Section 12.07. Trust Indenture Act Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.08. Effect of Headings and Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.09. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.10. Benefits of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.11. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.12. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 12.13. Communication by Certificateholders with Other Certificateholders . . . . . . . . . . . . . . . . 65 Section 12.14. Intention of Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
v 6 Reconciliation and tie between Atlas Air Pass Through Trust Agreement, dated as of February 9, 1998 and the Trust Indenture Act of 1939. This reconciliation does not constitute part of the Pass Through Trust Agreement.
Trust Indenture Act Pass Through Trust of 1939 Section Agreement Section ------------------------- ----------------------------- 310(a)(1) 7.07 (a)(2) 7.07 312(a) 3.05; 8.01; 8.02 313(a) 7.07 314(a) 8.04(a) - (c) (a)(4) 8.04(d) (c)(1) 1.02 (c)(2) 1.02 (d)(1) 7.13; 11.01 (d)(2) 7.13; 11.01 (d)(3) 2.01 (e) 1.02 315(b) 7.02 316(a)(last sentence 1.01(c) (a)(1)(A) 6.04 (a)(1)(B) 6.05 (b) 6.06 (c) 1.04(d) 317(a)(1) 6.03 (b) 7.13 318(a) 12.05
vi 7 PASS THROUGH TRUST AGREEMENT This PASS THROUGH TRUST AGREEMENT, dated as of February 9, 1998 (as the same may be amended, supplemented or modified from time to time, this "Agreement"), between ATLAS AIR, INC., a Delaware corporation (the "Company"), and WILMINGTON TRUST COMPANY, a Delaware trust company, as Trustee, is made with respect to the formation of Atlas Air Pass Through Trust 1998-1C-S and the deemed issuance of 8.01% Atlas Air 1998-1C-S Initial Pass Through Certificates representing fractional undivided interests in the Trust. W I T N E S S E T H: WHEREAS, the Company has obtained commitments from Boeing (such term and certain other capitalized terms used herein are defined below) for the delivery of certain Aircraft; WHEREAS, the Company as of the Transfer Date (as defined below) the Company will have financed the acquisition of all or a portion of such Aircraft either (i) through separate leveraged lease transactions, in which case the Company leases such Aircraft (collectively, the "Leased Aircraft") or (ii) through separate secured loan transactions, in which case the Company owns such Aircraft (collectively, the "Owned Aircraft"); WHEREAS, as of the Transfer Date in the case of each Leased Aircraft, each Owner Trustee, acting on behalf of the corresponding Owner Participant, will have issued pursuant to an Indenture, on a non-recourse basis, Equipment Notes in order to finance a portion of its purchase price of such Leased Aircraft; WHEREAS, as of the Transfer Date in the case of each Owned Aircraft, the Company will have issued pursuant to an Indenture, on a recourse basis, Equipment Notes to finance a portion of the purchase price of such Owned Aircraft; WHEREAS, as of the Transfer Date, the Related Trustee will assign, transfer and deliver all of such trustee's right, title and interest to the trust property held by the Related Trustee to the Trustee pursuant to the Assignment and Assumption Agreement (as defined below); WHEREAS, the Trustee, effective only, but automatically, upon execution and delivery of the Assignment and Assumption Agreement, will be deemed to have delared the creation of the Atlas Air Pass Through Trust 1998-1C-S (the "Trust") for the benefit of the Certificateholders, and each Holder of Certificates outstanding as of the Transfer Date, as a grantor of the Trust, by its respective acceptance of such Certificates, will join in the creation of this Trust with the Trustee; 8 2 WHEREAS, all Certificates deemed issued by the Trust will evidence fractional undivided interests in the Trust and will convey no rights, benefits or interests in respect of any property other than the Trust Property except for those Certificates to which an Escrow Receipt has been affixed; WHEREAS, to facilitate the sale of Equipment Notes to, and the purchase of Equipment Notes by, the Trustee on behalf of the Trust, the Company has duly authorized the execution and delivery of this Agreement as the "issuer", as such term is defined in and solely for purposes of the Securities Act, of the Certificates to be issued pursuant hereto and as the "obligor", as such term is defined in and solely for purposes of the Trust Indenture Act of 1939, as amended, with respect to all such Certificates and is undertaking to perform certain administrative and ministerial duties hereunder and is also undertaking to pay the ongoing fees and expenses of the Trustee; WHEREAS, upon the execution and delivery of the Assignment and Assumption Agreement, all of the conditions and requirements necessary to make this Agreement, when duly executed and delivered, a valid, binding and legal instrument in accordance with its terms and for the purposes herein expressed, have been done, performed and fulfilled, and the execution and delivery of this Agreement in the form and with the terms hereof have been in all respects duly authorized; WHEREAS, upon issuance of the Exchange Certificates, if any, or the effectiveness of the Shelf Registration Statement, this Agreement as amended or supplemented from time to time, will be subject to the provisions of the Trust Indenture Act of 1939, as amended, and shall, to the extent applicable, be governed by such provisions; NOW, THEREFORE, in consideration of the mutual agreements herein contained, and of other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms used herein that are defined in this Article I have the meanings assigned to them in this Article I, and include the plural as well as the singular; 9 3 (b) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, or by the rules promulgated under the Trust Indenture Act, have the meanings assigned to them therein; (c) all references in this Agreement to designated "Articles", "Sections", "Subsections" and other subdivisions are to the designated Articles, Sections, Subsections and other subdivisions of this Agreement; (d) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section, Subsection or other subdivision; and (e) unless the context otherwise requires, whenever the words "including" "include" or "includes" are used herein, it shall be deemed to be followed by the phrase "without limitation". "Act" has the meaning, with respect to any Certificateholder, specified in Section 1.04(a). "Affiliate" means, with respect to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person. For the purposes of this definition, "control", when used with respect to any specified Person, means the power, directly or indirectly, to direct the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agent Members" has the meaning specified in Section 3.05(a). "Agreement" has the meaning specified in the recitals hereto. "Aircraft" means each of the Aircraft or Substitute Aircraft in respect of which a Participation Agreement is entered into in accordance with the Note Purchase Agreement. "Assignment and Assumption Agreement" means the assignment and assumption agreement substantially in the form of Exhibit E to the Related Pass Through Trust Agreement executed and delivered in accordance with Section 11.01. "Authorized Agent" means, with respect to the Certificates, any Paying Agent or Registrar for the Certificates. 10 4 "Avoidable Tax" has the meaning set forth in Section 7.09(e). "Boeing" means The Boeing Company. "Business Day" means, with respect to the Certificates, any day other than a Saturday, a Sunday or a day on which commercial banks are required or authorized to close in Denver, Colorado, New York, New York, Chicago, Illinois or, so long as any Certificate is outstanding, the city and state in which the Trustee or any related Loan Trustee maintains its Corporate Trust Office or receives and disburses funds. "Certificate" means any one of the Initial Certificates or Exchange Certificates and any such Certificates issued in exchange therefor or replacement thereof pursuant to this Agreement. "Certificate Account" means, with respect to the Certificates, the account or accounts created and maintained for such series pursuant to Section 4.01(a). "Certificateholder" or "Holder" means the Person in whose name a Certificate is registered in the Register for Certificates. "Clearing Agency" means an organization registered as a "clearing agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as amended. "Clearing Agency Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects, directly or indirectly, book-entry transfers and pledges of securities deposited with the Clearing Agency. "Company" means Atlas Air, Inc., a Delaware corporation, or its successor in interest pursuant to Section 5.02, or (only in the context of provisions hereof, if any, when such reference is required for purposes of compliance with the Trust Indenture Act) any other "obligor" (within the meaning of the Trust Indenture Act) with respect to the Certificates. "Controlling Party" means the Person entitled to act as such pursuant to the terms of the Intercreditor Agreement. "Corporate Trust Office" means, with respect to the Trustee or any Loan Trustee, the office of such trustee in the city at which at any particular time its corporate trust business shall be principally administered. 11 5 "Delivery Period Termination Date" has the meaning specified in the Related Pass Through Trust Agreement. "Direction" has the meaning specified in Section 1.04(a). "Equipment Notes" means all of the equipment notes issued under the Indentures. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor federal statute. "Escrow Account" has the meaning specified in Section 2.02(b). "Escrow Agent" means, initially, First Security, National Association, and any replacement or successor therefor appointed in accordance with the Escrow Agreement. "Escrow Agreement" means the Escrow and Paying Agent Agreement dated as of February 9, 1998 relating to the Certificates, among the Escrow Agent, the Escrow Paying Agent, the Related Trustee (and after the Transfer Date, the Trustee) and Placement Agents, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Escrow Paying Agent" means the Person acting as paying agent under the Escrow Agreement. "Escrow Receipt" means the receipt substantially in the form annexed to the Escrow Agreement representing a fractional undivided interest in the funds held in escrow thereunder. "Escrowed Funds" has the meaning specified in Section 2.02(b). "Event of Default" means an Indenture Event of Default under any Indenture pursuant to which Equipment Notes held by such Trust were issued. "Exchange Certificates" means the certificates substantially in the form of Exhibit A to the Related Pass Through Trust Agreement issued in exchange for the Certificates pursuant to the Registration Rights Agreement and authenticated hereunder. "Fractional Undivided Interest" means the fractional undivided interest in a Trust that is evidenced by a Certificate. 12 6 "Global Certificates" has the meaning specified in Section 3.01(d). "Indenture" means each of the separate trust indentures and mortgages relating to the Aircraft, each as specified or described in a Delivery Notice delivered pursuant to the Note Purchase Agreement or the related Participation Agreement, in each case as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Indenture Event of Default" means, with respect to any Indenture, any Indenture Event of Default (as such term is defined in such Indenture). "Initial Regular Distribution Date" means, with respect to the Certificates, the first Regular Distribution Date on which a Scheduled Payment is to be made. "Institutional Accredited Investor" means an institutional investor that is an "accredited investor" within the meaning set forth in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act. "Intercreditor Agreement" means the Intercreditor Agreement dated as of February 9, 1998 among the Related Trustee (and after the Transfer Date, the Trustee), the Related Other Trustees (and after the Transfer Date, the Other Trustees), the Liquidity Providers, the liquidity providers relating to the Certificates issued under (and as defined in) each of the Related Other Pass Through Trust Agreements, and Wilmington Trust Company, as Subordination Agent and as trustee thereunder, as amended, supplemented or otherwise modified from time to time in accordance with its terms. "Issuance Date" means, with respect to the Certificates, the date of the issuance of such Certificates. "Investors" means the Placement Agents together with all subsequent beneficial owners of the Certificates. "Lease" means, with respect to each Leased Aircraft, any lease between an Owner Trustee, as the lessor, and the Company, as the lessee, referred to in the related Indenture, as such lease may be amended, supplemented or otherwise modified in accordance with its terms; and "Leases" means all such Leases. "Leased Aircraft" has the meaning specified in the recitals hereto. 13 7 "Leased Aircraft Participation Agreement" means any participation agreement substantially in the form of Exhibit A-1 to the Note Purchase Agreement, as the same may be amended, supplemented or otherwise modified in accordance with its terms. "Letter of Representations" means, with respect to the Certificates, an agreement among the Company, the Related Trustee (and after the Transfer Date, the Trustee) and the initial Clearing Agency. "Liquidity Facility" means, with respect to the Certificates, any revolving credit agreement, letter of credit or similar facility relating to the Certificates between a bank or other financial institution and a Subordination Agent, as amended, replaced, supplemented or otherwise modified from time to time in accordance with its terms and the terms of any Intercreditor Agreement. "Liquidity Provider" means, with respect to the Certificates, a bank or other financial institution that agrees to provide a Liquidity Facility for the benefit of the holders of Certificates. "Loan Trustee" means, with respect to any Equipment Note or the Indenture applicable thereto, the bank or trust company designated as loan or indenture trustee under such Indenture, and any successor to such Loan Trustee as such trustee; and "Loan Trustees" means all of the Loan Trustees under the Indentures. "Non-U.S. Person" means a Person that is not a "U.S. person", as defined in Regulation S. "Note Documents" means, with respect to the Certificates, the Equipment Notes with respect to such Certificates and, with respect to such Equipment Notes, the related Indenture, Note Purchase Agreement and, if the related Aircraft is leased to the Company, the related Lease and the related Owner Trustee's Purchase Agreement. "Note Purchase Agreement" means, with respect to the Certificates, any note purchase, refunding, participation or similar agreement; and "Note Purchase Agreements" means all such agreements. "Offering Memorandum" means the Offering Memorandum dated January 27, 1998 relating to the offering of the Certificates and the certificates offered under the Related Other Pass Through Trust Agreements. "Officer's Certificate" means a certificate signed, (a) in the case of the Company, by the Chairman or Vice Chairman of the Board of Directors, the 14 8 President, any Vice President or the Treasurer of the Company, signing alone, or (b) in the case of the Trustee or an Owner Trustee or a Loan Trustee, a Responsible Officer of the Trustee or such Owner Trustee or such Loan Trustee, as the case may be. "Offshore Certificates Exchange Date" has the meaning specified in Section 3.01(d). "Offshore Global Certificates" has the meaning specified in Section 3.01(d). "Offshore Physical Certificates" has the meaning specified in Section 3.01(e). "Opinion of Counsel" means a written opinion of legal counsel who (a) in the case of counsel for the Company may be (i) a senior attorney of the Company one of whose principal duties is furnishing advice as to legal matters, (ii) Cahill Gordon & Reindel or (iii) such other counsel designated by the Company and reasonably acceptable to the Trustee and (b) in the case of any Owner Trustee or any Loan Trustee, may be such counsel as may be designated by any of them whether or not such counsel is an employee of any of them, and who shall be reasonably acceptable to the Trustee. "Other Pass Through Trust Agreements" means each of the two other Atlas Air 1998-1 Pass Through Trust Agreements relating to Atlas Air Pass Through Trust, Series 1998-1A-S and Atlas Air Pass Through Trust, Series 1998-1B-S, dated the date hereof. "Other Trustees" means the trustees under the Other Pass Through Trust Agreements, and any successor or other trustee appointed as provided therein. "Other Trusts" means the Atlas Air Pass Through Trust 1998-1A-S and the Atlas Air Pass Through Trust 1998-1B-S, each created on the date hereof. "Outstanding" when used with respect to Certificates, means, as of the date of determination, all Certificates theretofore authenticated and delivered under this Agreement, except: (a) Certificates theretofore cancelled by the Registrar or delivered to the Trustee or the Registrar for cancellation; (b) All of the Certificates if money in the full amount required to make the final distribution with respect to such series pursuant to Section 11.01 hereof has been theretofore deposited with the Trustee in trust 15 9 for the Holders of the Certificates as provided in Section 4.01 pending distribution of such money to such Certificateholders pursuant to payment of such final distribution payment; and (c) Certificates in exchange for or in lieu of which other Certificates have been authenticated and delivered pursuant to this Agreement. "Owned Aircraft" has the meaning specified in the recitals hereto. "Owned Aircraft Participation Agreement" means any participation agreement substantially in the form of Exhibit C-1 to the Note Purchase Agreement, as the same may be amended, supplemented or otherwise modified in accordance with its terms. "Owner Trustee's Purchase Agreement" has the meaning, with respect to the Certificates if the related Aircraft is leased to the Company, specified therefor in the related Lease. "Participation Agreement" means, collectively, the Leased Aircraft Participation Agreement and the Owned Aircraft Participation Agreement. "Paying Agent" means, with respect to the Certificates, the paying agent maintained and appointed for the Certificates pursuant to Section 7.12. "Permanent Offshore Global Certificates" has the meaning specified in Section 3.01(d). "Permitted Investments" means obligations of the United States of America or agencies or instrumentalities thereof for the payment of which the full faith and credit of the United States of America is pledged, maturing in not more than 60 days after the date of acquisition thereof or such lesser time as is required for the distribution of any Special Payments on a Special Distribution Date. "Person" means any person, including any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, trustee, unincorporated organization, or government or any agency or political subdivision thereof. "Physical Certificates" has the meaning specified in Section 3.01. "Placement Agents" means Morgan Stanley & Co. Incorporated, BT Alex. Brown Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co. 16 10 "Placement Agreement" means the Placement Agreement dated January 27, 1998 among the Placement Agents and the Company, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Pool Balance" means, as of any date, (i) the original aggregate face amount of the Certificates as defined in the Related Pass Through Trust Agreement less (ii) the aggregate amount of all payments made in respect of the Certificates other than payments made in respect of interest or premium thereon or reimbursement of any costs or expenses incurred in connection therewith. The Pool Balance as of any Distribution Date shall be computed after giving effect to the payment of principal, if any, on the Equipment Notes or other Trust Property held in the Trust and the distribution thereof to be made on such Distribution Date. "Pool Factor" means, as of any date, the quotient (rounded to the seventh decimal place) computed by dividing (i) the Pool Balance of such series as at such date by (ii) the original aggregate face amount of the Certificates as defined in the Related Pass Through Trust Agreement. The Pool Factor as of any Distribution Date shall be computed after giving effect to the payment of principal, if any, on the Equipment Notes or other Trust Property held in the Trust and the distribution thereof to be made on such Distribution Date. "Potential Purchaser" has the meaning, with respect to any Certificateholder, specified in Section 6.01(b). "Private Placement Legend" has the meaning specified in Section 3.02(a). "PTC Event of Default" means, with respect to the Certificates, any failure to pay within ten Business Days of the due date thereof: (i) the outstanding Pool Balance of such series of Certificates on the date specified in any Trust Supplement for such payment or (ii) interest due on the Certificates on any Distribution Date (unless the related Subordination Agent shall have made an Interest Drawing or Drawings (as defined in the related Intercreditor Agreement), or a withdrawal or withdrawals pursuant to a cash collateral account under such Intercreditor Agreement, with respect thereto in an aggregate amount sufficient to pay such interest and shall have distributed such amount to the Trustee). "Purchasing Certificateholder" has the meaning, with respect to any Certificateholder, specified in Section 6.01(b). "QIB" means a qualified institutional buyer as defined in Rule 144A. 17 11 "Record Date" means, with respect to any Trust or the related series of Certificates, (i) for Scheduled Payments to be distributed on any Regular Distribution Date, other than the final distribution with respect to such series, the 15th day (whether or not a Business Day) preceding such Regular Distribution Date, and (ii) for Special Payments to be distributed on any Special Distribution Date, other than the final distribution with respect to such series, the 15th day (whether or not a Business Day) preceding such Special Distribution Date. "Register" and "Registrar" means, each with respect to the Certificates, the register maintained and the registrar appointed pursuant to Sections 3.04 and 7.12. "Registration Event" has the meaning set forth in the Placement Agreement. "Registration Rights Agreement" means the Registration Rights Agreement dated February 9, 1998, among the Placement Agents, the Related Trustee (and after the Transfer Date, the Trustee), the Related Other Trustees (and after the Transfer Date, the Other Trustees) and the Company, as amended, supplemented or otherwise modified from time to time in accordance with its terms. "Registration Statement" means the Registration Statement defined in the Registration Rights Agreement. "Regular Distribution Date" means, with respect to distributions of Scheduled Payments in respect of any series of Certificates, each date designated as such in this Agreement, until payment of all the Scheduled Payments to be made under the Equipment Notes held in the Trust have been made. "Regulation S" means Regulation S under the Securities Act or any successor regulation thereto. "Related Pass Through Trust Agreement" means the Atlas Air 1998-1C-O Pass Through Trust Agreement relating to the Atlas Air Pass Through Trust 1998-1C-O and entered into by the Company and the Related Trustee, as amended, supplemented or otherwise modified from time to time in accordance with its terms. "Related Trust" means the Atlas Pass Through Trust 1998-1C-O, formed under the Related Pass Through Trust Agreement. "Related Trustee" means the trustee under the Related Pass Through Trust Agreement. 18 12 "Request" means a request by the Company setting forth the subject matter of the request accompanied by an Officer's Certificate and an Opinion of Counsel as provided in Section 1.02 of this Agreement. "Responsible Officer" means, with respect to any Trustee, any Loan Trustee and any Owner Trustee, any officer in the Corporate Trust Department of the Trustee, Loan Trustee or Owner Trustee or any other officer customarily performing functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of his knowledge of and familiarity with a particular subject. "Responsible Party" means, with respect to the Certificates, the person designated as such in the related Trust Supplement. "Rule 144A" means Rule 144A under the Securities Act and any successor rule thereto. "Scheduled Payment" means, with respect to any Equipment Note, (i) any payment of principal or interest on such Equipment Note (other than any such payment which is not in fact received by the Trustee or any Subordination Agent within five days of the date on which such payment is scheduled to be made) or (ii) any payment of interest on the Certificates with funds drawn under the Liquidity Facility for such series, which payment represents the installment of principal on such Equipment Note at the stated maturity of such installment, the payment of regularly scheduled interest accrued on the unpaid principal amount of such Equipment Note, or both; provided, however, that any payment of principal, premium, if any, or interest resulting from the redemption or purchase of any Equipment Note shall not constitute a Scheduled Payment. "SEC" means the Securities and Exchange Commission, as from time to time constituted or created under the Securities Exchange Act of 1934, as amended, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties on such date. "Selling Certificateholder" has the meaning, with respect to any Certificateholder, specified in Section 6.01(b). "Shelf Registration Statement" has the meaning set forth in the Registration Rights Agreement. 19 13 "Special Distribution Date" means, with respect to the Certificates, each date on which a Special Payment is to be distributed as specified in this Agreement. "Special Payment" means (i) any payment (other than a Scheduled Payment) in respect of, or any proceeds of, any Equipment Note or Trust Indenture Estate (as defined in each Indenture) or Special Redemption Premium, (ii) the amounts required to be distributed pursuant to the last paragraph of Section 2.02(b) or (iii) the amounts required to be distributed pursuant to the penultimate paragraph of Section 2.02(b). "Special Payments Account" means, with respect to the Certificates, the account or accounts created and maintained for such series pursuant to Section 4.01(b) and the related Trust Supplement. "Special Redemption Premium" means the premium payable by the Company in respect of the Final Withdrawal pursuant to the Note Purchase Agreement. "Specified Investments" means, with respect to any Trust, (i) obligations of, or guaranteed by, the United States Government or agencies thereof, (ii) open market commercial paper of any corporation incorporated under the laws of the United States of America or any state thereof rated at least P-2 or its equivalent by Moody's Investors Service, Inc. or at least A-2 or its equivalent by Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., (iii) certificates of deposit issued by commercial banks organized under the laws of the United States or of any political subdivision thereof having a combined capital and surplus in excess of $100,000,000 which banks or their holding companies have a rating of A or its equivalent by Moody's Investors Service, Inc. or Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc.; provided, however, that the aggregate amount at any one time so invested in certificates of deposit issued by any one bank shall not exceed 5% of such bank's capital and surplus, (iv) U.S. dollar- denominated offshore certificates of deposit issued by, or offshore time deposits with, any commercial bank described in clause (iii) above or any subsidiary thereof and (v) repurchase agreements with any financial institution having combined capital and surplus of at least $100,000,000 with any of the obligations described in clauses (i) through (iv) above as collateral; provided further that if all of the above investments are unavailable, the entire amounts to be invested may be used to purchase federal funds from an entity described in clause (iii) above. "Subordination Agent" has the meaning specified therefor in the Intercreditor Agreement. "Substitute Aircraft" has the meaning specified in the Note Purchase Agreement. 20 14 "Temporary Offshore Global Certificates" has the meaning specified in Section 3.01(d). "Transfer Date" has the meaning specified in Section 11.01. "Triggering Event" has the meaning specified therefor in the Intercreditor Agreement. "Trust" means the trust under this Agreement. "Trustee" means Wilmington Trust Company, or its successor in interest, and any successor or other trustee appointed as provided herein. "Trustee's Liens" has the meaning specified in Section 7.17. "Trust Indenture Act", except as otherwise provided in Section 9.06, means, with respect to any particular Trust, the United States Trust Indenture Act of 1939, as in force at the date as of which the related Pass Through Trust Agreement was executed. "Trust Property" means (i) subject to the Intercreditor Agreement, the Equipment Notes held as the property of the Trust, all monies at any time paid thereon and all monies due and to become due thereunder, (ii) funds from time to time deposited in the Escrow Account, the Certificate Account and the Special Payments Account and, subject to the Intercreditor Agreement, any proceeds from the sale by the Trustee pursuant to Article VI hereof of any such Equipment Note, (iii) all rights of the Trust and the Trustee, on behalf of the Trust, under the Intercreditor Agreement, the Escrow Agreement, the Note Purchase Agreement and the Liquidity Facilities, including, without limitation, all rights to receive certain payments thereunder, and all monies paid to the Trustee on behalf of the Trust pursuant to the Intercreditor Agreement or the Liquidity Facilities, provided that rights with respect to the Deposits or under the Escrow Agreement, will not constitute Trust Property. "U.S. Global Certificate" has the meaning specified in Section 3.01(c). "U.S. Physical Certificates" has the meaning specified in Section 3.01(e). "8.01% 1998-1C Initial Pass Through Certificates" has the meaning specified in Section 3.01(a). "8.01% 1998-1C Exchange Pass Through Certificates" has the meaning specified in Section 3.01(a). 21 15 Section 1.02. Compliance Certificates and Opinions. Upon any application or request by the Company, any Owner Trustee or any Loan Trustee to the Trustee to take any action under any provision of this Agreement, the Company, such Owner Trustee or such Loan Trustee, as the case may be, shall furnish to the Trustee (i) an Officer's Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Agreement relating to the proposed action have been complied with and (ii) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Agreement relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Agreement (other than a certificate provided pursuant to Section 8.04(d)) shall include: (a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions in this Agreement relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. Section 1.03. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters and any such Person may certify or give an opinion as to such matters in one or several documents. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Agreement, they may, but need not, be consolidated and form one instrument. 22 16 Section 1.04. Directions of Certificateholders. (a) Any direction, consent, request, demand, authorization, notice, waiver or other action provided by this Agreement in respect of the Certificates to be given or taken by Certificateholders (a "Direction") may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Certificateholders in person or by an agent or proxy duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, when it is hereby expressly required pursuant to this Agreement, to the Company or any Loan Trustee. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Certificateholders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent or proxy shall be sufficient for any purpose of this Trust Agreement and conclusive in favor of the Trustee, the Company and the related Loan Trustee, if made in the manner provided in this Section 1.04. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the certificate of any notary public or other officer of any jurisdiction authorized to take acknowledgments of deeds or administer oaths that the Person executing such instrument acknowledged to him the execution thereof, or by an affidavit of a witness to such execution sworn to before any such notary or such other officer, and where such execution is by an officer of a corporation or association or a member of a partnership, on behalf of such corporation, association or partnership, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other reasonable manner which the Trustee deems sufficient. (c) In determining whether the Certificateholders of the requisite Fractional Undivided Interests of Certificates Outstanding have given any Direction under this Agreement, Certificates owned by the Company or any Affiliate thereof shall be disregarded and deemed not to be Outstanding for purposes of any such determination. In determining whether the Trustee shall be protected in relying upon any such Direction, only Certificates which the Trustee knows to be so owned shall be so disregarded. Notwithstanding the foregoing, (i) if any such Person owns 100% of the Certificates Outstanding, such Certificates shall not be so disregarded, and (ii) if any amount of Certificates so owned by any such Person have been pledged in good faith, such Certificates shall not be disregarded if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Certificates and that the pledgee is not the Company or any Affiliate thereof. (d) The Company may, at its option, by delivery of an Officer's Certificate to the Trustee, set a record date to determine the Certificateholders in respect of the Certificates, entitled to give any Direction. Notwithstanding Section 316(c) of the Trust 23 17 Indenture Act, such record date shall be the record date specified in such Officer's Certificate, which shall be a date not more than 30 days prior to the first solicitation of Certificateholders of the applicable series in connection therewith. If such a record date is fixed, such Direction may be given before or after such record date, but only the Certificateholders of record of the applicable series at the close of business on such record date shall be deemed to be Certificateholders for the purposes of determining whether Certificateholders of the requisite proportion of Outstanding Certificates have authorized or agreed or consented to such Direction, and for that purpose the Outstanding Certificates shall be computed as of such record date; provided, however, that no such Direction by the Certificateholders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Agreement not later than one year after such record date. (e) Any Direction by the Holder of any Certificate shall bind the Holder of every Certificate issued upon the transfer thereof or in exchange therefor or in lieu thereof, whether or not notation of such Direction is made upon such Certificate. (f) Except as otherwise provided in Section 1.04(c), Certificates owned by or pledged to any Person shall have an equal and proportionate benefit under the provisions of this Agreement, without preference, priority or distinction as among all of the Certificates. ARTICLE II ACQUISITION OF THE TRUST PROPERTY Section 2.01. Acquisition of Trust Property. The Trustee is hereby irrevocably authorized and directed to execute and deliver the Assignment and Assumption Agreement on the date specified in Section 11.01 of the Related Pass Through Trust Agreement, subject only to the satisfaction of the conditions set forth in said Section 11.01. This Agreement (except only for the immediately preceding sentence hereof, which is effective upon execution and delivery hereof) shall become effective upon the execution and delivery of the Assignment and Assumption Agreement by the Trustee and the Related Trustee, automatically and without any further signature or action on the part of the Company and the Trustee, and shall thereupon constitute the legal, valid and binding obligation of the parties hereto enforceable against each of the parties hereto in accordance with its terms. Upon such execution and delivery of the Assignment and Assumption Agreement, the Related Trust shall be terminated, the Certificateholders shall receive beneficial interests in the Trust in exchange for their interests in the Related Trust equal to their respective beneficial interests in the Related Trust and the "Outstanding" (as defined in the Related Pass Through Trust Agreement) pass through certificates representing fractional undivided interests in the Related Trust shall be deemed for all purposes of this Agreement, 24 18 without further signature or action of any party or Certificateholder, to be Certificates representing the same Fractional Undivided Interests in the Trust and Trust Property. By acceptance of its Certificate, each Certificateholder consents to and ratifies such assignment, transfer and delivery of the trust property of the Related Trust to the Trustee upon the execution and delivery of the Assignment and Assumption Agreement. Section 2.02. [Intentionally omitted] Section 2.03. Acceptance by Trustee. The Trustee, upon the execution and delivery of the Assignment and Assumption Agreement, acknowledges its acceptance of all right, title and interest in and to the Trust Property and will hold such right, title and interest for the benefit of all then present and future Certificateholders, upon the trusts herein set forth. By its payment for and acceptance of each Certificate issued under the Related Pass Through Trust Agreement and deemed issued under this Agreement, each Holder of such Certificate as grantor of such Trust thereby joins in the creation and declaration of such Trust. Section 2.04. Limitation of Powers. The Trust is constituted solely for the purpose of making the investment in the Equipment Notes, and, except as set forth herein, the Trustee shall not be authorized or empowered to acquire any other investments or engage in any other activities and, in particular, the Trustee shall not be authorized or empowered to do anything that would cause such Trust to fail to qualify as a "grantor trust" for federal income tax purposes (including, as subject to this restriction, acquiring any Aircraft (as defined in the respective Indentures) by bidding such Equipment Notes or otherwise, or taking any action with respect to any such Aircraft once acquired). ARTICLE III THE CERTIFICATES Section 3.01. Title, Form, Denomination and Execution of Certificates. (a) The Initial Certificates shall be known as the "8.01% 1998-1C-S Initial Pass Through Certificates" and the Exchange Certificates shall be known as the "8.01% 1998-1C-S Exchange Pass Through Certificates", in each case, of the Trust. Each Certificate will represent a fractional undivided interest in the Trust and shall be substantially in the form set forth as Exhibit A to the Related Pass Through Trust Agreement, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by the Related Pass Through Trust Agreement or by this Agreement, as the case may be, or as the Trustee may deem appropriate, to reflect the fact that the Certificates are being issued hereunder as opposed to under the Related Pass Through Trust Agreement and may have such letters, numbers or other marks of identification and such legends or endorsements 25 19 placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Certificates, as evidenced by their execution of the Certificates. Any portion of the text of any Certificate may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Certificate. (b) The Initial Certificates shall be issued only in fully registered form without coupons and only in denominations of $100,000 or integral multiples of $1,000 in excess thereof, except that one Certificate may be issued in a denomination of less than $100,000. The Exchange Certificates will be issued in denominations of $1,000 or integral multiples thereof. Each Certificate shall be dated the date of its authentication. The aggregate Fractional Undivided Interest of Certificates initially deemed issued hereunder shall not at any time exceed the aggregate principal amount of "Outstanding" pass through trust certificates representing fractional undivided interests in the Related Trust on the Transfer Date. (c) Initial Certificates offered and sold in reliance on Rule 144A shall be issued initially in the form of a single permanent global Certificate in registered form, substantially in the form set forth as Exhibit A to the Related Pass Through Trust Agreement (the "U.S. Global Certificate"), duly executed and authenticated by the Trustee as hereinafter provided. The U.S. Global Certificate will be registered in the name of a nominee for the Depositary and deposited with the Trustee, as custodian for the Depositary. The aggregate principal amount of the U.S. Global Certificate may from time to time be increased or decreased by adjustments made on the records of the Depositary or its nominee, or of the Trustee, as custodian for the Depositary or its nominee, as hereinafter provided. (d) Initial Certificates offered and sold in offshore transactions in reliance on Regulation S shall be issued initially in the form of a single temporary global Certificate in registered form, substantially in the form set forth as Exhibit A to the Related Pass Through Trust Agreement (the "Temporary Offshore Global Certificate") duly executed and authenticated by the Trustee as hereinafter provided. The Temporary Offshore Global Certificates will be registered in the name of a nominee of the Depositary for credit to the account of the Agent Members acting as depositaries for Euroclear and Cedel and deposited with the Trustee as custodian for the Depositary. At any time following March 21, 1998 (the "Offshore Certificates Exchange Date"), upon receipt by the Trustee of a certificate substantially in the form of Exhibit B to the Related Pass Through Trust Agreement, a single permanent global Certificate in registered form substantially in the form set forth in Exhibit A (the "Permanent Offshore Global Certificate"; and together with the Temporary Offshore Global Certificate, the "Offshore Global Certificates"), duly executed and authenticated by the Trustee as hereinafter provided, shall be registered in the name of a nominee for the Depositary and deposited with the Trustee, as custodian for the Depositary, and the Registrar shall reflect on its books and records the date of such transfer and a decrease in the principal 26 20 amount of any Temporary Offshore Global Certificate in an amount equal to the principal amount of the beneficial interest in such Temporary Offshore Global Certificate transferred. The U.S. Global Certificate and the Offshore Global Certificates are sometimes referred to as the "Global Certificates". (e) Initial Certificates offered and sold to Institutional Accredited Investors shall be issued in the form of permanent certificated Certificates in registered form in substantially the form set forth as Exhibit A to the Related Pass Through Trust Agreement (the "U.S. Physical Certificates"). Certificates issued pursuant to Section 3.05(b) in exchange for interests in any Offshore Global Certificate shall be in the form of permanent certificated Certificates in registered form substantially in the form set forth in Exhibit A (the "Offshore Physical Certificates"). The Offshore Physical Certificates and U.S. Physical Certificates are sometimes collectively herein referred to as the "Physical Certificates". (f) The Exchange Certificates shall be issued in the form of one or more global Certificates substantially in the form of Exhibit A to the Related Pass Through Trust Agreement (each, a "Global Exchange Certificate"), except that (i) the Private Placement Legend (hereinafter defined) shall be omitted and (ii) such Exchange Certificates shall contain such appropriate insertions, omissions, substitutions and other variations from the form set forth in Exhibit A to the Related Pass Through Trust Agreement relating to the nature of the Exchange Certificates as the Responsible Officer of the Trustee executing such Exchange Certificates on behalf of the Trust may determine, as evidenced by such officer's execution on behalf of the Trust of such Exchange Certificates. Such Global Exchange Certificates shall be in registered form and be registered in the name of DTC and deposited with the Trustee, at its Corporate Trust Office, as custodian for DTC. The aggregate principal amount of any Global Exchange Certificate may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC for such Global Exchange Certificate, which adjustments shall be conclusive as to the aggregate principal amount of any such Global Exchange Certificate. Subject to clause (i) and (ii) of the first sentence of this Section 3.01(f), the terms hereof applicable to Restricted Global Certificates and/or Global Certificates shall apply to the Global Exchange Certificates, mutatis mutandis. (g) The definitive Certificates shall be in registered form and shall be typed, printed, lithographed or engraved or produced by any combination of these methods or may be produced in any other manner, all as determined by the officers executing such Certificates, as evidenced by their execution of such Certificates. Section 3.02. Restrictive Legends. (a) Subject to Section 3.06, unless and until (i) an Initial Certificate is sold under an effective Registration Statement or (ii) an Initial Certificate is exchanged for an Exchange Certificate pursuant to an effective Exchange Offer Registration Statement, in each case as provided for in the Registration Rights Agreement, 27 21 each Global Certificate (other than the Permanent Offshore Global Certificate) and each U.S. Physical Certificate shall bear the following legend (the "Private Placement Legend") on the face thereof: THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS CERTIFICATE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT; (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFICATE WAS HELD BY ATLAS AIR, INC., THE TRUSTEE OR ANY AFFILIATE OF ANY OF SUCH PERSONS RESELL OR OTHERWISE TRANSFER THIS CERTIFICATE EXCEPT (A) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (B) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING $100,000 OR MORE AGGREGATE PRINCIPAL AMOUNT OF SUCH CERTIFICATE THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS CERTIFICATE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT; AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS CERTIFICATE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS CERTIFICATE WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFICATE WAS HELD BY ATLAS AIR, 28 22 INC., THE TRUSTEE OR ANY AFFILIATE OF ANY OF SUCH PERSONS THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE PASS THROUGH TRUST AGREEMENT CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS CERTIFICATE IN VIOLATION OF THE FOREGOING RESTRICTIONS. (b) Each Global Certificate shall also bear the following legend on the face thereof: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE PASS THROUGH TRUST AGREEMENT REFERRED TO HEREIN. Section 3.03. Authentication of Certificates. (a) [Intentionally omitted] (b) No Certificate shall be entitled to any benefit under this Agreement or be valid or obligatory for any purpose, unless there appears on such Certificate a certificate of authentication substantially in the form provided for herein executed by the Related Trustee or by the Trustee by the manual signature of one of its authorized signatories, and 29 23 such certificate upon any Certificate shall be conclusive evidence, and the only evidence, that such Certificate has been duly authenticated and delivered hereunder. Section 3.04. Transfer and Exchange. The Trustee shall cause to be kept at the office or agency to be maintained by it in accordance with the provisions of Section 7.12 of this Agreement a register (the "Register") for the Certificates in which, subject to such reasonable regulations as it may prescribe, the Trustee shall provide for the registration of the Certificates and of transfers and exchanges of the Certificates as herein provided. The Trustee shall initially be the registrar (the "Registrar") for the purpose of registering the Certificates and transfers and exchanges of the Certificates as herein provided. A Certificateholder may transfer a Certificate by written application to the Registrar stating the name of the proposed transferee and otherwise complying with the terms of this Agreement, including providing a written certificate or other evidence of compliance with any restrictions on transfer. No such transfer shall be effected until, and such transferee shall succeed to the rights of a Certificateholder only upon, final acceptance and registration of the transfer by the Registrar in the Register. Prior to the registration of any transfer by a Certificateholder as provided herein, the Trustee shall treat the person in whose name the Certificate is registered as the owner thereof for all purposes, and the Trustee shall not be affected by notice to the contrary. Furthermore, the Depositary shall, by acceptance of a Global Certificate, agree that transfers of beneficial interests in such Global Certificate may be effected only through a book-entry system maintained by the Depositary (or its agent), and that ownership of a beneficial interest in the Certificate shall be required to be reflected in a book entry. When Certificates are presented to the Registrar with a request to register the transfer or to exchange them for an equal face amount of Certificates of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its requirements for such transactions are met. To permit registrations of transfers and exchanges in accordance with the terms, conditions and restrictions hereof, the Trustee shall execute and authenticate Certificates at the Registrar's request. No service charge shall be made for any registration of transfer or exchange of the Certificates, but the Trustee may require payment by the transferor of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or other similar governmental charges payable upon exchanges pursuant to Section 3.10 or 9.07). Section 3.05. Book-Entry Provisions for U.S. Global Certificate and Offshore Global Certificates. (a) Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Agreement with respect to any Global Certificate held on their behalf by the Depositary, or the Trustee as its custodian, and the Depositary may be treated by the Trustee and any agent of the Trustee as the absolute owner of such Global Certificate for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Trustee or any agent of the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or shall impair, as between the Depositary 30 24 and its Agent Members, the operation of customary practices governing the exercise of the rights of a holder of any Certificate. Upon the issuance of any Global Certificate, the Registrar or its duly appointed agent shall record a nominee of the Depositary as the registered holder of such Global Certificate. (b) Transfers of any Global Certificate shall be limited to transfers of such Global Certificate or Offshore Global Certificate in whole, but not in part, to nominees of the Depositary, its successor or such successor's nominees. Beneficial interests in the U.S. Global Certificate and any Offshore Global Certificate may be transferred in accordance with the rules and procedures of the Depositary and the provisions of Section 3.06. Beneficial interests in the U.S. Global Certificate or an Offshore Global Certificate shall be delivered to all beneficial owners in the form of U.S. Physical Certificates or Offshore Physical Certificates, as the case may be, if (i) the Depositary notifies the Trustee that it is unwilling or unable to continue as Depositary for the U.S. Global Certificate or such Offshore Global Certificate, as the case may be, and a successor depositary is not appointed by the Trustee within 90 days of such notice or (ii) an Event of Default has occurred and is continuing and the Registrar has received a request from the Depositary to issue Physical Certificates. (c) Any beneficial interest in one of the Global Certificates that is transferred to a Person who takes delivery in the form of an interest in the other Global Certificate will, upon such transfer, cease to be an interest in such Global Certificate and become an interest in the other Global Certificate and, accordingly, will thereafter be subject to all transfer restrictions, if any, and other procedures applicable to beneficial interests in such other Global Certificate for as long as it remains such an interest. (d) In connection with the transfer of the entire U.S. Global Certificate or an entire Offshore Global Certificate to the beneficial owners thereof pursuant to paragraph (b) of this Section 3.05, such U.S. Global Certificate or Offshore Global Certificate, as the case may be, shall be deemed to be surrendered to the Trustee for cancellation, and the Trustee shall execute, authenticate and deliver, to each beneficial owner identified by the Depositary in exchange for its beneficial interest in such U.S. Global Certificate or Offshore Global Certificate, as the case may be, an equal aggregate principal amount of U.S. Physical Certificates or Offshore Physical Certificates, as the case may be, of authorized denominations. (e) Any U.S. Physical Certificate delivered in exchange for an interest in the U.S. Global Certificate pursuant to paragraph (b) of this Section 3.05 shall, except as otherwise provided by paragraph (f) of Section 3.06, bear the Private Placement Legend. (f) Any Offshore Physical Certificate delivered in exchange for an interest in an Offshore Global Certificate pursuant to paragraph (b) of this Section shall, except as 31 25 otherwise provided by paragraph (f) of Section 3.06, bear the applicable legend regarding transfer restrictions set forth in Section 3.02(a). (g) The registered holder of the U.S. Global Certificate or any Offshore Global Certificate may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Agreement or the Certificates. Section 3.06. Special Transfer Provisions. Unless and until (i) an Initial Certificate is sold under an effective Registration Statement, or (ii) an Initial Certificate is exchanged for an Exchange Certificate pursuant to an effective Exchange Offer Registration Statement, in each case pursuant to the Registration Rights Agreement, the following provisions shall apply to such Initial Certificates: (a) Transfers to Non-QIB Institutional Accredited Investors. The following provisions shall apply with respect to the registration of any proposed transfer of a Certificate to any Institutional Accredited Investor which is not a QIB (excluding transfers to or by Non-U.S. Persons): (i) The Registrar shall register the transfer of any Certificate, whether or not such Certificate bears the Private Placement Legend, if (x) the requested transfer is at least three years after the later of the original issue date of the Certificates and the last date on which such Certificate was held by the Company or any affiliate of any such persons or (y) the proposed transferee has delivered to the Registrar a letter substantially in the form of Exhibit D to the Related Pass Through Trust Agreement and the aggregate principal amount of the Certificates being transferred is at least $100,000. (ii) If the proposed transferor is an Agent Member holding a beneficial interest in the U.S. Global Certificate, upon receipt by the Registrar of (x) the documents, if any, required by paragraph (i) and (y) instructions given in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records the date of the transfer and a decrease in the principal amount of such U.S. Global Certificate in an amount equal to the principal amount of the beneficial interest in such U.S. Global Certificate to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver to the transferor or at its direction, one or more U.S. Physical Certificates of like tenor and amount. (b) Transfers to QIBs. The following provisions shall apply with respect to the registration of any proposed transfer of an Initial Certificate to a QIB (excluding Non-U.S. Persons): 32 26 (i) If the Certificate to be transferred consists of U.S. Physical Certificates or an interest in any Temporary Offshore Global Certificate, the Registrar shall register the transfer if such transfer is being made by a proposed transferor who has checked the box provided for on the form of Initial Certificate stating, or has otherwise advised the Trustee and the Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on the form of Initial Certificate stating, or has otherwise advised the Trustee and the Registrar in writing, that it is purchasing the Initial Certificate for its own account or an account with respect to which it exercises sole investment discretion and that it, or the Person on whose behalf it is acting with respect to any such account, is a QIB within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Trust and/or the Company as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A. (ii) Upon receipt by the Registrar of the documents referred to in clause (i) above and instructions given in accordance with the Depositary's and the Registrar's procedures therefor, the Registrar shall reflect on its books and records the date of such transfer and an increase in the principal amount of the U.S. Global Certificate in an amount equal to the principal amount of the U.S. Physical Certificates or interests in the Temporary Offshore Global Certificate, as the case may be, being transferred, and the Trustee shall cancel such Physical Certificates or decrease the amount of such Temporary Offshore Global Certificate so transferred. (c) Transfers of Interests in the Permanent Offshore Global Certificate or Offshore Physical Certificates. The Registrar shall register any transfer of interests in the Permanent Offshore Global Certificate or Offshore Physical Certificates without requiring any additional certification. (d) Transfers to Non-U.S. Persons at Any Time. The following provisions shall apply with respect to any registration of any transfer of an Initial Certificate to a Non-U.S. Person: (i) Prior to the Offshore Certificates Exchange Date, the Registrar shall register any proposed transfer of an Initial Certificate to a Non-U.S. Person upon receipt of a certificate substantially in the form set forth as Exhibit C to the Related Pass Through Trust Agreement from the proposed transferor. 33 27 (ii) On and after the Offshore Certificates Exchange Date, the Registrar shall register any proposed transfer to any Non-U.S. Person if the Certificate to be transferred is a U.S. Physical Certificate or an interest in the U.S. Global Certificate, upon receipt of a certificate substantially in the form of Exhibit C from the proposed transferor. The Registrar shall promptly send a copy of such certificate to the Company. (iii) Upon receipt by the Registrar of (x) the documents, if any, required by paragraph (ii) and (y) instructions in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records the date of such transfer and a decrease in the principal amount of such U.S. Global Certificate in an amount equal to the principal amount of the beneficial interest in such U.S. Global Certificate to be transferred, and (B) upon receipt by the Registrar of instructions given in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Offshore Global Certificate in an amount equal to the principal amount of the U.S. Physical Certificate or the U.S. Global Certificate, as the case may be, to be transferred, and the Trustee shall cancel the Physical Certificate, if any, so transferred or decrease the amount of such U.S. Global Certificate. (e) Private Placement Legend. Upon the transfer, exchange or replacement of Certificates not bearing the Private Placement Legend, the Registrar shall deliver Certificates that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Certificates bearing the Private Placement Legend, the Registrar shall deliver only Certificates that bear the Private Placement Legend unless either (i) the circumstances contemplated by paragraph (a)(i)(x) or (e)(ii) of this Section 3.06 exist or (ii) there is delivered to the Registrar an Opinion of Counsel to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act. (f) General. By its acceptance of any Certificate bearing the Private Placement Legend, each Holder of such a Certificate acknowledges the restrictions on transfer of such Certificate set forth in this Agreement and agrees that it will transfer such Certificate only as provided in this Agreement. The Registrar shall not register a transfer of any Certificate unless such transfer complies with the restrictions on transfer of such Certificate set forth in this Agreement. In connection with any transfer of Certificates, each Certificateholder agrees by its acceptance of the Certificates to furnish the Registrar or the Trustee such certifications, legal opinions or other information as either of them may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or a transaction not subject to, 34 28 the registration requirements of the Securities Act; provided that the Registrar shall not be required to determine the sufficiency of any such certifications, legal opinions or other information. Until such time as no Certificates remain Outstanding, the Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 3.05 or this Section 3.06. The Trustee, if not the Registrar at such time, shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar. Section 3.07. Mutilated, Destroyed, Lost or Stolen Certificates. If (a) any mutilated Certificate is surrendered to the Registrar or the Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Certificate and (b) there is delivered to the Registrar and the Trustee such security, indemnity or bond, as may be required by them to save each of them harmless, then, in the absence of notice to the Registrar or the Trustee that such destroyed, lost or stolen Certificate has been acquired by a bona fide purchaser, and provided that the requirements of Section 8-405 of the Uniform Commercial Code in effect in any applicable jurisdiction are met, the Trustee shall execute, authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate or Certificates, in authorized denominations and of like Fractional Undivided Interest and bearing a number not contemporaneously outstanding. In connection with the issuance of any new Certificate under this Section 3.07, the Trustee may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee and the Registrar) connected therewith. Any duplicate Certificate issued pursuant to this Section 3.07 shall constitute conclusive evidence of the appropriate Fractional Undivided Interest in the Trust, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Certificates. Section 3.08. Persons Deemed Owners. Prior to due presentment of a Certificate for registration of transfer, the Trustee, the Registrar and any Paying Agent may treat the Person in whose name any Certificate is registered (as of the day of determination) as the owner of such Certificate for the purpose of receiving distributions pursuant to Article 35 29 IV and for all other purposes whatsoever, and none of the Trustee, the Registrar or any Paying Agent shall be affected by any notice to the contrary. Section 3.09. Cancellation. All Certificates surrendered for payment or transfer or exchange shall, if surrendered to the Trustee or any agent of the Trustee other than the Registrar, be delivered to the Registrar for cancellation and shall promptly be cancelled by it. No Certificates shall be authenticated in lieu of or in exchange for any Certificates cancelled as provided in this Section, except as expressly permitted by this Agreement. All cancelled Certificates held by the Registrar shall be destroyed and a certification of their destruction delivered to the Trustee. Section 3.10. Temporary Certificates. Until definitive Certificates are ready for delivery, the Trustee shall authenticate temporary Certificates. Temporary Certificates shall be substantially in the form of definitive Certificates but may have insertions, substitutions, omissions and other variations determined to be appropriate by the officers executing the temporary Certificates, as evidenced by their execution of such temporary Certificates. If temporary Certificates are issued, the Trustee will cause definitive Certificates to be prepared without unreasonable delay. After the preparation of definitive Certificates, the temporary Certificates shall be exchangeable for definitive Certificates upon surrender of the temporary Certificates at the office or agency of the Trustee designated for such purpose pursuant to Section 7.12, without charge to the Certificateholder. Upon surrender for cancellation of any one or more temporary Certificates, the Trustee shall execute, authenticate and deliver in exchange therefor a like face amount of definitive Certificates of authorized denominations. Until so exchanged, the temporary Certificates shall be entitled to the same benefits under this Agreement as definitive Certificates. Section 3.11. Limitation of Liability for Payments. All payments and distributions made to Certificateholders shall be made only from the Trust Property and only to the extent that the Trustee shall have sufficient income or proceeds from the Trust Property to make such payments in accordance with the terms of Article IV of this Agreement. Each Certificateholder, by its acceptance of a Certificate, agrees that it will look solely to the income and proceeds from the Trust Property for any payment or distribution due to such Certificateholder pursuant to the terms of this Agreement and that it will not have any recourse to the Company, the Trustee, the Loan Trustees, the Liquidity Providers, the Owner Trustees or the Owner Participants, except as otherwise expressly provided herein or in the Intercreditor Agreement. The Company is a party to this Agreement solely for purposes of meeting the requirements of the Trust Indenture Act, and therefore shall not have any right, obligation or liability hereunder (except as otherwise expressly provided herein). 36 30 ARTICLE IV DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS Section 4.01. Certificate Account and Special Payments Account. (a) The Trustee shall establish and maintain on behalf of the Certificateholders a Certificate Account as one or more non-interest-bearing accounts. The Trustee shall hold such Certificate Account in trust for the benefit of the Certificateholders, and shall make or permit withdrawals therefrom only as provided in this Agreement. On each day when a Scheduled Payment is made to the Trustee under the Intercreditor Agreement with respect to the Certificates, the Trustee, upon receipt thereof, shall immediately deposit the aggregate amount of such Scheduled Payment in such Certificate Account. (b) The Trustee shall establish and maintain on behalf of the Certificateholders a Special Payments Account as one or more accounts, which shall be non-interest bearing except as provided in Section 4.04. The Trustee shall hold the Special Payments Account in trust for the benefit of the Certificateholders and shall make or permit withdrawals therefrom only as provided in this Agreement. On each day when one or more Special Payments are made to the Trustee under the Intercreditor Agreement and upon payment of the Special Redemption Premium to the Trustee under the Note Purchase Agreement with respect to the Certificates, the Trustee, upon receipt thereof, shall immediately deposit the aggregate amount of such Special Payments in such Special Payments Account. (c) The Trustee shall present (or, if applicable, cause the Subordination Agent to present) to the related Loan Trustee of each Equipment Note such Equipment Note on the date of its stated final maturity or, in the case of any Equipment Note which is to be redeemed in whole pursuant to the related Indenture, on the applicable redemption date under such Indenture. Section 4.02. Distributions from Certificate Account and Special Payments Account. (a) On each Regular Distribution Date with respect to a series of Certificates or as soon thereafter as the Trustee has confirmed receipt of the payment of all or any part of the Scheduled Payments due on the Equipment Notes held (subject to the Intercreditor Agreement) in the related Trust on such date, the Trustee shall distribute out of the applicable Certificate Account the entire amount deposited therein pursuant to Section 4.01(a). There shall be so distributed to each Certificateholder of record of such series on the Record Date with respect to such Regular Distribution Date (other than as provided in Section 11.01 concerning the final distribution) by check mailed to such Certificateholder, at the address appearing in the Register, such Certificateholder's pro rata share (based on the Fractional Undivided Interest in the Trust held by such Certificateholder) 37 31 of the total amount in the applicable Certificate Account, except that, with respect to Certificates registered on the Record Date in the name of a Clearing Agency (or its nominee), such distribution shall be made by wire transfer in immediately available funds to the account designated by such Clearing Agency (or such nominee). (b) On each Special Distribution Date with respect to any Special Payment with respect to the Certificates or as soon thereafter as the Trustee has confirmed receipt of any Special Payments due on the Equipment Notes held (subject to the Intercreditor Agreement) in the related Trust or realized upon the sale of such Equipment Notes or receipt of the Special Redemption Premium, the Trustee shall distribute out of the applicable Special Payments Account the entire amount of such applicable Special Payment deposited therein pursuant to Section 4.01(b). There shall be so distributed to each Certificateholder of record of such series on the Record Date with respect to such Special Distribution Date (other than as provided in Section 11.01 concerning the final distribution) by check mailed to such Certificateholder, at the address appearing in the Register, such Certificateholder's pro rata share (based on the Fractional Undivided Interest in the related Trust held by such Certificateholder) of the total amount in the applicable Special Payments Account on account of such Special Payment, except that, with respect to Certificates registered on the Record Date in the name of a Clearing Agency (or its nominee), such distribution shall be made by wire transfer in immediately available funds to the account designated by such Clearing Agency (or such nominee). (c) The Trustee shall, at the expense of the Company, cause notice of each Special Payment with respect to a series of Certificates to be mailed to each Certificateholder at his address as it appears in the Register. In the event of redemption or purchase of Equipment Notes held in the related Trust, such notice shall be mailed not less than 15 days prior to the Special Distribution Date for the Special Payment resulting from such redemption or purchase, which Special Distribution Date shall be the date of such redemption or purchase. In the event that any Special Redemption Premium is to be paid by the Company to the Trustee under the Note Purchase Agreement, such notice shall be mailed, together with the notice by the Escrow Paying Agent under Section 2.06 of the Escrow Agreement, not less than 20 days prior to the Special Distribution Date for such amount, which Special Distribution Date shall be the Final Withdrawal Date. In the case of any other Special Payments, such notice shall be mailed as soon as practicable after the Trustee has confirmed that it has received funds for such Special Payment, stating the Special Distribution Date for such Special Payment which shall occur not less than 15 days after the date of such notice and as soon as practicable thereafter. Notices mailed by the Trustee shall set forth: (i) the Special Distribution Date and the Record Date therefor (except as otherwise provided in Section 11.01); 38 32 (ii) the amount of the Special Payment for each $1,000 face amount Certificate and the amount thereof constituting principal, premium, if any, and interest; (iii) the reason for the Special Payment; and (iv) if the Special Distribution Date is the same date as a Regular Distribution Date for the Certificates, the total amount to be received on such date for each $1,000 face amount Certificate. If the amount of (i) premium, if any, payable upon the redemption or purchase of an Equipment Note or (ii) the Special Redemption Premium, if any, has not been calculated at the time that the Trustee mails notice of a Special Payment, it shall be sufficient if the notice sets forth the other amounts to be distributed and states that any premium received will also be distributed. If any redemption of the Equipment Notes held in any Trust is cancelled, the Trustee, as soon as possible after learning thereof, shall cause notice thereof to be mailed to each Certificateholder at its address as it appears on the Register. Section 4.03. Statements to Certificateholders. (a) On each Regular Distribution Date and Special Distribution Date, the Trustee will include with each distribution of a Scheduled Payment or Special Payment, as the case may be, to Certificateholders a statement setting forth the information provided below (in the case of a Special Payment, including any Special Redemption Premium, reflecting in part the information provided by the Escrow Paying Agent under the Escrow Agreement). Such statement shall set forth (per $1,000 aggregate principal amount of Certificate as to (ii), (iii), (iv) and (v) below) the following information: (i) the aggregate amount of funds distributed on such Distribution Date under the Agreement and under the Escrow Agreement, indicating the amount allocable to each source; (ii) the amount of such distribution under this Agreement allocable to principal and the amount allocable to premium (including the Special Redemption Premium), if any; (iii) the amount of such distribution under this Agreement allocable to interest; (iv) the amount of such distribution under the Escrow Agreement allocable to interest; 39 33 (v) the amount of such distribution under the Escrow Agreement allocable to Deposits; and (vi) the Pool Balance and the Pool Factor. With respect to the Certificates registered in the name of a Clearing Agency or its nominee, on the Record Date prior to each Distribution Date, the Trustee will request from the Clearing Agency a securities position listing setting forth the names of all Clearing Agency Participants reflected on the Clearing Agency's books as holding interests in the Certificates on such Record Date. On each Distribution Date, the Trustee will mail to each such Clearing Agency Participant the statement described above and will make available additional copies as requested by such Clearing Agency Participant for forwarding to holders of interests in the Certificates. (b) Within a reasonable period of time after the end of each calendar year but not later than the latest date permitted by law, the Trustee shall furnish to each Person who at any time during such calendar year was a Certificateholder of record a statement containing the sum of the amounts determined pursuant to clauses (a)(i), (a)(ii), (a)(iii), (a)(iv) and (a)(v) above with respect to the related Trust for such calendar year or, in the event such Person was a Certificateholder of record during a portion of such calendar year, for the applicable portion of such year, and such other items as are readily available to the Trustee and which a Certificateholder shall reasonably request as necessary for the purpose of such Certificateholder's preparation of its federal income tax returns. Such statement and such other items shall be prepared on the basis of information supplied to the Trustee by the Clearing Agency Participants and shall be delivered by the Trustee to such Clearing Agency Participants to be available for forwarding by such Clearing Agency Participants to the holders of interests in the Certificates in the manner described in Section 4.03(a). (c) Promptly following (i) the Transfer Date, if there has been any change in the information set forth in clauses (x), (y) and (z) below from that set forth in page 65 of the Offering Memorandum, and (ii) any early redemption or purchase of, or any default in the payment of principal or interest in respect of, any of the Equipment Notes held in the Trust, or any Final Withdrawal, the Trustee shall furnish to Certificateholders of record on such date a statement setting forth (x) the expected Pool Balances for each subsequent Regular Distribution Date following the Transfer Date, (y) the related Pool Factors for such Regular Distribution Dates and (z) the expected principal distribution schedule of the Equipment Notes, in the aggregate, held as Trust Property at the date of such notice. With respect to the Certificates registered in the name of a Clearing Agency, on the Transfer Date, the Trustee will request from such Clearing Agency a securities position listing setting forth the names of all Clearing Agency Participants reflected on such Clearing Agency's books as holding interests in the Certificates on such date. The Trustee will mail to each such Clearing Agency Participant the statement described above and will make available additional 40 34 copies as requested by such Clearing Agency Participant for forwarding to holders of interests in the Certificates. Section 4.04. Investment of Special Payment Moneys. Any money received by the Trustee pursuant to Section 4.01(b) representing a Special Payment which is not distributed on the date received shall, to the extent practicable, be invested in Permitted Investments by the Trustee pending distribution of such Special Payment pursuant to Section 4.02. Any investment made pursuant to this Section 4.04 shall be in such Permitted Investments having maturities not later than the date that such moneys are required to be used to make the payment required under Section 4.02 on the applicable Special Distribution Date and the Trustee shall hold any such Permitted Investments until maturity. The Trustee shall have no liability with respect to any investment made pursuant to this Section 4.04, other than by reason of the willful misconduct or negligence of the Trustee. All income and earnings from such investments shall be distributed on such Special Distribution Date as part of such Special Payment. ARTICLE V THE COMPANY Section 5.01. Maintenance of Corporate Existence. The Company, at its own cost and expense, will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights and franchises, except as otherwise specifically permitted in Section 5.02; provided, however, that the Company shall not be required to preserve any right or franchise if the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company. Section 5.02. Consolidation, Merger, Etc. The Company shall not consolidate with or merge into any other corporation or convey, transfer or lease substantially all of its assets as an entirety to any Person unless: (a) the corporation formed by such consolidation or into which the Company is merged or the Person that acquires by conveyance, transfer or lease substantially all of the assets of the Company as an entirety shall be (i) organized and validly existing under the laws of the United States of America or any state thereof or the District of Columbia, (ii) a "citizen of the United States" as defined in 49 U.S.C. Section 40102(a)(15), as amended, and (iii) a United States certificated air carrier, if and so long as such status is a condition of entitlement to the benefits of Section 1110 of the Bankruptcy Reform Act of 1978, as amended (11 U.S.C. Section 1110), with respect to the Leases or the Aircraft owned by the Company; 41 35 (b) the corporation formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance, transfer or lease substantially all of the assets of the Company as an entirety shall execute and deliver to the Trustee applicable to the Certificates a duly authorized, valid, binding and enforceable agreement in form and substance reasonably satisfactory to the Trustee containing an assumption by such successor corporation or Person of the due and punctual performance and observance of each covenant and condition of the Note Documents and of this Agreement applicable to the Certificates to be performed or observed by the Company; and (c) the Company shall have delivered to the Trustee an Officer's Certificate of the Company and an Opinion of Counsel of the Company reasonably satisfactory to the Trustee, each stating that such consolidation, merger, conveyance, transfer or lease and the assumption agreement mentioned in clause (b) above comply with this Section 5.02 and that all conditions precedent herein provided for relating to such transaction have been complied with. Upon any consolidation or merger, or any conveyance, transfer or lease of substantially all of the assets of the Company as an entirety in accordance with this Section 5.02, the successor corporation or Person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Agreement applicable to the Certificates with the same effect as if such successor corporation or Person had been named as the Company herein. No such conveyance, transfer or lease of substantially all of the assets of the Company as an entirety shall have the effect of releasing any successor corporation or Person which shall have become such in the manner prescribed in this Section 5.02 from its liability in respect of this Agreement and any Note Document applicable to the Certificates to which it is a party. ARTICLE VI DEFAULT Section 6.01. Events of Default. (a) Exercise of Remedies. Upon the occurrence and during the continuation of any Indenture Default under any Indenture, the Trustee may, to the extent it is the Controlling Party at such time (as determined pursuant to the Intercreditor Agreement), direct the exercise of remedies as provided in the Intercreditor Agreement. (b) Purchase Rights of Certificateholders. By acceptance of its Certificate, each Certificateholder agrees that at any time after the occurrence and during the 42 36 continuation of a Triggering Event, each Class D Certificateholder shall have the right to purchase all, but not less than all, of the Certificates, the Class A Certificates and the Class B Certificates upon ten days' written notice to the Trustee, the Class A Trustee, the Class B Trustee and each other Class D Certificateholder, provided that (A) if prior to the end of such ten-day period any other Class D Certificateholder notifies such purchasing Class D Certificateholder that such other Class D Certificateholder wants to participate in such purchase, then such other Class D Certificateholder may join with the purchasing Class D Certificateholder to purchase all, but not less than all, of the Certificates, the Class A Certificates and the Class B Certificates pro rata based on the Fractional Undivided Interest in the Class D Trust held by each such Class D Certificateholder and (B) if prior to the end of such ten-day period any other Class D Certificateholder fails to notify the purchasing Class D Certificateholder of such other Class D Certificateholder's desire to participate in such a purchase, then such other Class D Certificateholder shall lose its right to purchase the Certificates pursuant to this Section 6.01(b). The purchase price with respect to the Certificates shall be equal to the Pool Balance of the Certificates, together with accrued and unpaid interest thereon to the date of such purchase, without premium, but including any other amounts then due and payable to the Certificateholders under this Agreement, the Intercreditor Agreement, the Escrow Agreement or any Note Document or on or in respect of the Certificates; provided, however, that (i) if such purchase occurs after the record date specified in Section 2.03(b) of the Escrow Agreement relating to the distribution of unused Deposits and accrued and unpaid interest thereunder, such purchase price shall be reduced by the aggregate amount of unused Deposits and interest to be distributed under the Escrow Agreement (which deducted amounts shall remain distributable to, and may be retained by, the Certificateholder as of such Record Date) and (ii) if such purchase occurs after a Record Date, such purchase price shall be reduced by the amount to be distributed hereunder on the related Distribution Date (which deducted amounts shall remain distributable to, and may be retained by, the Certificateholder as of such Record Date); provided further that no such purchase of Certificates shall be effective unless the purchaser(s) shall certify to the Trustee that contemporaneously with such purchase, such purchaser(s) is purchasing, pursuant to the terms of this Agreement and the Other Agreements, the Certificates, the Class A Certificates and the Class B Certificates which are senior to the securities held by such purchaser(s). Each payment of the purchase price of the Certificates referred to in the first sentence hereof shall be made to an account or accounts designated by the Trustee and each such purchase shall be subject to the terms of this Section 6.01(b). Each Certificateholder agrees by its acceptance of its Certificate that it will, subject to Section 3.04 of this Agreement, upon payment from such Class D Certificateholder(s), as the case may be, of the purchase price set forth in the first sentence of this paragraph, forthwith sell, assign, transfer and convey to the purchaser(s) thereof (without recourse, representation or warranty of any kind except for its own acts), all of the right, title, interest and obligation of such Certificateholder in this Agreement, the Escrow Agreement, the Deposit Agreement, the Intercreditor Agreement, the Liquidity Facilities, the 43 37 Note Documents and all Certificates and Escrow Receipts held by such Certificateholder (excluding all right, title and interest under any of the foregoing to the extent such right, title or interest is with respect to an obligation not then due and payable as respects any action or inaction or state of affairs occurring prior to such sale) and the purchaser shall assume all of such Certificateholder's obligations under this Agreement, the Escrow Agreement, the Deposit Agreement, the Intercreditor Agreement, the Liquidity Facilities, the Note Documents and all such Certificates and Escrow Receipts. The Certificates will be deemed to be purchased on the date payment of the purchase price is made notwithstanding the failure of the Certificateholders to deliver any Certificates and, upon such a purchase, (i) the only rights of the Certificateholders will be to deliver the Certificates to the purchaser(s) and receive the purchase price for such Certificates and (ii) if the purchaser(s) shall so request, such Certificateholder will comply with all the provisions of Section 3.04 of this Agreement to enable new Certificates to be issued to the purchaser in such denominations as it shall request. All charges and expenses in connection with the issuance of any such new Certificates shall be borne by the purchaser thereof. As used in this Section 6.01, the terms "Class A Certificateholder", "Class A Trust", "Class A Certificate", "Class A Trustee", "Class B Certificate", "Class B Certificateholder", "Class B Trust", "Class B Trustee", "Class D Certificateholder" and "Class D Trust", shall have the respective meanings assigned to such terms in the Intercreditor Agreement. Section 6.02. Incidents of Sale of Equipment Notes. Upon any sale of all or any part of the Equipment Notes held in the Trust made either under the power of sale given under this Agreement or otherwise for the enforcement of this Agreement, the following shall be applicable: (a) Certificateholders and Trustee May Purchase Equipment Notes. Any Certificateholder, the Trustee in its individual or any other capacity or any other Person may bid for and purchase any of the Equipment Notes held in the Trust, and upon compliance with the terms of sale, may hold, retain, possess and dispose of such Equipment Notes in their own absolute right without further accountability. (b) Receipt of Trustee Shall Discharge Purchaser. The receipt of the Trustee making such sale shall be a sufficient discharge to any purchaser for his purchase money, and, after paying such purchase money and receiving such receipt, such purchaser or its personal representative or assigns shall not be obliged to see to the application of such purchase money, or be in any way answerable for any loss, misapplication or nonapplication thereof. (c) Application of Moneys Received upon Sale. Any moneys collected by the Trustee upon any sale made either under the power of sale given by this 44 38 Agreement or otherwise for the enforcement of this Agreement shall be applied as provided in Section 4.02. Section 6.03. Judicial Proceedings Instituted by Trustee; Trustee May Bring Suit. If there shall be a failure to make payment of the principal of, premium, if any, or interest on any Equipment Note held in the Trust, or if there shall be any failure to pay Rent (as defined in the relevant Lease) under any Lease when due and payable, then the Trustee, in, its own name and as trustee of an express trust, as holder of such Equipment Notes, to the extent permitted by and in accordance with the terms of any related Intercreditor Agreement and any related Note Documents (subject to rights of the applicable Owner Trustee or Owner Participant to cure any such failure to pay principal of, premium, if any, or interest on any Equipment Note or to pay Rent under any Lease in accordance with the applicable Indenture), shall be entitled and empowered to institute any suits, actions or proceedings at law, in equity or otherwise, for the collection of the sums so due and unpaid on such Equipment Notes or under such Lease and may prosecute any such claim or proceeding to judgment or final decree with respect to the whole amount of any such sums so due and unpaid. Section 6.04. Control by Certificateholders. Subject to Section 6.03 and the Intercreditor Agreement, the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the related Trust shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee with respect to the Trust or pursuant to the terms of the Intercreditor Agreement, or exercising any trust or power conferred on the Trustee under this Agreement or the Intercreditor Agreement, including any right of the Trustee as Controlling Party under the Intercreditor Agreement or as holder of the Equipment Notes held in the related Trust; provided, however, that (a) such Direction shall not in the opinion of the Trustee be in conflict with any rule of law or with this Agreement and would not involve the Trustee in personal liability or expense, (b) the Trustee shall not determine that the action so directed would be unjustly prejudicial to the Certificateholders not taking part in such Direction, and (c) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such Direction. Section 6.05. Waiver of Past Defaults. Subject to any related Intercreditor Agreement, the Certificateholders holding Certificates of a series evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust (i) may on behalf of all of the Certificateholders waive any past Event of Default hereunder and its 45 39 consequences or (ii) if the Trustee is the Controlling Party, may direct the Trustee to instruct the applicable Loan Trustee to waive any past Indenture Event of Default under any related Indenture and its consequences, and thereby annul any Direction given by such Certificateholders or the Trustee to such Loan Trustee with respect thereto, except a default: (a) in the deposit of any Scheduled Payment or Special Payment under Section 4.01 or in the distribution of any payment under Section 4.02 on the Certificates, or (b) in the payment of the principal of (premium, if any) or interest on the Equipment Notes held in the Trust, or (c) in respect of a covenant or provision hereof which under Article IX hereof cannot be modified or amended without the consent of each Certificateholder holding an Outstanding Certificate of a series affected thereby. Upon any such waiver, such default shall cease to exist with respect to the Certificates and any Event of Default arising therefrom shall be deemed to have been cured for every purpose and any direction given by the Trustee on behalf of the Certificateholders to the relevant Loan Trustee shall be annulled with respect thereto; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Upon any such waiver, the Trustee shall vote the Equipment Notes issued under the relevant Indenture to waive the corresponding Indenture Event of Default. Section 6.06. Right of Certificateholders to Receive Payments Not to Be Impaired. Anything in this Agreement to the contrary notwithstanding, including, without limitation, Section 6.07 hereof, but subject to the Intercreditor Agreement, the right of any Certificateholder to receive distributions of payments required pursuant to Section 4.02 hereof on the applicable Certificates when due, or to institute suit for the enforcement of any such payment on or after the applicable Regular Distribution Date or Special Distribution Date, shall not be impaired or affected without the consent of such Certificateholder. Section 6.07. Certificateholders May Not Bring Suit Except Under Certain Conditions. A Certificateholder shall not have the right to institute any suit, action or proceeding at law or in equity or otherwise with respect to this Agreement, for the appointment of a receiver or for the enforcement of any other remedy under this Agreement, unless: (a) such Certificateholder previously shall have given written notice to the Trustee of a continuing Event of Default; 46 40 (b) Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than 25% of the related Trust shall have requested the Trustee in writing to institute such action, suit or proceeding and shall have offered to the Trustee indemnity as provided in Section 7.03(e); (c) the Trustee shall have refused or neglected to institute any such action, suit or proceeding for 60 days after receipt of such notice, request and offer of indemnity; and (d) no direction inconsistent with such written request shall have been given to the Trustee during such 60-day period by Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust. It is understood and intended that no one or more of the Certificateholders shall have any right in any manner whatsoever hereunder or under the related Trust Supplement or under the Certificates to (i) surrender, impair, waive, affect, disturb or prejudice any property in the Trust Property of the Trust, or the lien of any related Indenture on any property subject thereto, or the rights of the Certificateholders or the holders of the Equipment Notes, (ii) obtain or seek to obtain priority over or preference with respect to any other such Certificateholder or (iii) enforce any right under this Agreement, except in the manner herein provided and for the equal, ratable and common benefit of all the Certificateholders subject to the provisions of this Agreement. Section 6.08. Remedies Cumulative. Every remedy given hereunder to the Trustee or to any of the Certificateholders shall not be exclusive of any other remedy or remedies, and every such remedy shall be cumulative and in addition to every other remedy given hereunder or now or hereafter given by statute, law, equity or otherwise. Section 6.09. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Agreement, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of such suit, and may assess costs against any such party litigant, in the manner and to the extent provided in the Trust Indenture Act; provided, however, that neither this Section 6.09 nor the Trust Indenture Act shall be deemed to authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Company. 47 41 ARTICLE VII THE TRUSTEE Section 7.01. Certain Duties and Responsibilities. (a) Except during the continuance of an Event of Default in respect of a Trust, the Trustee undertakes to perform such duties in respect of the Trust as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Trustee. (b) In case an Event of Default in respect of a Trust has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Agreement in respect of the Trust, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (c) No provision of this Agreement shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that (i) this Subsection shall not be construed to limit the effect of Subsection (a) of this Section 7.01; and (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts. (d) Whether or not herein expressly so provided, every provision of this Agreement relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 7.01. Section 7.02. Notice of Defaults. As promptly as practicable after, and in any event within 90 days after, the occurrence of any default (as such term is defined below) hereunder known to the Trustee, the Trustee shall transmit by mail to the Company, any Owner Trustees, the Owner Participants, the Loan Trustees and the Certificateholders holding Certificates in accordance with Section 313(c) of the Trust Indenture Act, notice of such default hereunder known to the Trustee, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal, premium, if any, or interest on any Equipment Note, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith shall determine that the withholding of such notice is in the interests of the Certificateholders. For the purpose of this Section 7.02 in respect of any Trust, the term 48 42 "default" means any event that is, or after notice or lapse of time or both would become, an Event of Default in respect of that Trust. Section 7.03. Certain Rights of Trustee. Subject to the provisions of Section 315 of the Trust Indenture Act: (a) the Trustee may rely and shall be protected in acting or refraining from acting in reliance upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Request; (c) whenever in the administration of this Agreement or the Intercreditor Agreement, the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officer's Certificate of the Company, any Owner Trustee or any Loan Trustee; (d) the Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement or the Intercreditor Agreement at the Direction of any of the Certificateholders pursuant to this Agreement or the Intercreditor Agreement, unless the Certificateholders shall have offered to the Trustee reasonable security or indemnity against the cost, expenses and liabilities which might be incurred by it in compliance with such Direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document; (g) the Trustee may execute any of the trusts or powers under this Agreement or the Intercreditor Agreement or perform any duties under this Agreement or the Intercreditor Agreement either directly or by or through agents or 49 43 attorneys, and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it under this Agreement or the Intercreditor Agreement; (h) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the Direction of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Agreement or the Intercreditor Agreement; and (i) the Trustee shall not be required to expend or risk its own funds in the performance of any of its duties under this Agreement, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk is not reasonably assured to it. Section 7.04. Not Responsible for Recitals or Issuance of Certificates. The recitals contained herein and in the Certificates, except the certificates of authentication, shall not be taken as the statements of the Trustee, and the Trustee assumes no responsibility for their correctness. Subject to Section 7.15, the Trustee makes no representations as to the validity or sufficiency of this Agreement, any Equipment Notes, the Intercreditor Agreement, the Deposit Agreement, the Escrow Agreement, the Certificates, or any Note Documents, except that the Trustee hereby represents and warrants that this Agreement has been, and the Registration Rights Agreement, each Certificate, the Note Purchase Agreement, the Escrow Agreement and the Intercreditor Agreement will be, executed and delivered by one of its officers who is duly authorized to execute and deliver such document on its behalf. Section 7.05. May Hold Certificates. The Trustee, any Paying Agent, Registrar or any of their Affiliates or any other agent, in their respective individual or any other capacity, may become the owner or pledgee of Certificates and, subject to Sections 310(b) and 311 of the Trust Indenture Act, if applicable, may otherwise deal with the Company, any Owner Trustees or the Loan Trustees with the same rights it would have if it were not Trustee, Paying Agent, Registrar or such other agent. Section 7.06. Money Held in Trust. Money held by the Trustee or the Paying Agent in trust under this Agreement need not be segregated from other funds except to the extent required herein or by law and neither the Trustee nor the Paying Agent shall have any liability for interest upon any such moneys except as provided for herein. 50 44 Section 7.07. Compensation and Reimbursement. The Company agrees: (a) to pay, or cause to be paid, to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); and (b) to reimburse, or cause to be reimbursed, the Trustee upon its request for all reasonable out- of-pocket expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Agreement or the Intercreditor Agreement (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence, willful misconduct or bad faith or as may be incurred due to the Trustee's breach of its representations and warranties set forth in Section 7.15; and (c) to indemnify the Trustee with respect to the Certificates, pursuant to Section 8.1 of the Owned Aircraft Participation Agreements and Section 9.1 of the Leased Aircraft Participation Agreements, as the case may be. The Trustee shall be entitled to reimbursement from, and shall have a lien prior to the Certificates upon, all property and funds held or collected by the Trustee in its capacity as Trustee for any tax incurred without negligence, bad faith or willful misconduct, on its part, arising out of or in connection with the acceptance or administration of the Trust (other than any tax attributable to the Trustee's compensation for serving as such), including any costs and expenses incurred in contesting the imposition of any such tax. The Trustee shall notify the Company of any claim for any tax for which it may seek reimbursement. If the Trustee reimburses itself from the Trust Property of such Trust for any such tax, it will mail a brief report within 30 days setting forth the amount of such tax and the circumstances thereof to all Certificateholders as their names and addresses appear in the Register. Section 7.08. Corporate Trustee Required; Eligibility. The Trust shall at all times have a Trustee which shall be eligible to act as a trustee under Section 310(a) of the Trust Indenture Act and shall have a combined capital and surplus of at least $75,000,000 (or a combined capital and surplus in excess of $5,000,000 and the obligations of which, whether now in existence or hereafter incurred, are fully and unconditionally guaranteed by a corporation organized and doing business under the laws of the United States, any state or territory thereof or of the District of Columbia and having a combined capital and surplus of at least $75,000,000). If such corporation publishes reports of conditions at least annually, pursuant to law or to the requirements of federal, state, territorial or District of Columbia supervising or examining authority, then for the purposes of this Section 7.08 the combined 51 45 capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of conditions so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 7.08 to act as Trustee of the Trust, the Trustee shall resign immediately as Trustee of the Trust in the manner and with the effect specified in Section 7.09. Section 7.09. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee of the Trust pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 7.10. (b) The Trustee may resign at any time as Trustee of the Trust by giving prior written notice thereof to the Company, the Authorized Agents, the Owner Trustees and the Loan Trustees. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Company, the Owner Trustees and the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by Direction of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in such Trust delivered to the Trustee and to the Company, the Owner Trustees and the Loan Trustees. (d) If at any time in respect of the Trust: (i) the Trustee shall fail to comply with Section 310 of the Trust Indenture Act, if applicable, after written request therefor by the Company or by any Certificateholder who has been a bona fide Certificateholder for at least six months; or (ii) the Trustee shall cease to be eligible under Section 7.08 and shall fail to resign after written request therefor by the Company or by any such Certificateholder; or (iii) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; 52 46 then, in any case, (i) the Company may remove the Trustee or (ii) any Certificateholder who has been a bona fide Certificateholder for at least six months may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee of the Trust. (e) If a Responsible Officer of the Trustee shall obtain actual knowledge of an Avoidable Tax (as defined below) in respect of any Trust which has been or is likely to be asserted, the Trustee shall promptly notify the Company and shall, within 30 days of such notification, resign as Trustee of such Trust hereunder unless within such 30-day period the Trustee shall have received notice that the Company has agreed to pay such tax. The Company shall promptly appoint a successor Trustee of such Trust in a jurisdiction where there are no Avoidable Taxes. As used herein, an "Avoidable Tax" in respect of such Trust means a state or local tax: (i) upon (w) such Trust, (x) such Trust Property, (y) Certificateholders of the Trust or (z) the Trustee for which the Trustee is entitled to seek reimbursement from the Trust Property of such Trust, and (ii) which would be avoided if the Trustee were located in another state, or jurisdiction within a state, within the United States of America. A tax shall not be an Avoidable Tax in respect of any Trust if the Company or any Owner Trustee shall agree to pay, and shall pay, such tax. (f) If the Trustee shall resign, be removed or become incapable of acting as Trustee of the Trust or if a vacancy shall occur in the office of the Trustee of the Trust for any cause, the Company shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or other occurrence of such vacancy, a successor Trustee shall be appointed by Direction of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in such Trust delivered to the Company, the Owner Trustees, the Loan Trustee and the retiring Trustee, then the successor Trustee so appointed shall, with the approval of the Company of such appointment, which approval shall not be unreasonably withheld, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed as provided above. If no successor Trustee shall have been so appointed as provided above and accepted appointment in the manner hereinafter provided, the resigning Trustee or any Certificateholder who has been a bona fide Certificateholder of the related series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (g) The successor Trustee shall give notice of the resignation and removal of the Trustee and appointment of the successor Trustee by mailing written notice of such event by first-class mail, postage prepaid, to the Certificateholders as their names and addresses appear in the Register. Each notice shall include the name of such successor Trustee and the address of its Corporate Trust Office. 53 47 Section 7.10. Acceptance of Appointment by Successor. Every successor Trustee appointed hereunder shall execute and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Company or the successor Trustee, such retiring Trustee shall execute and deliver an instrument transferring to such successor Trustee all such rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all Trust Property held by such retiring Trustee, subject nevertheless to its lien, if any, provided for in Section 7.07. Upon request of any such successor Trustee, the Company, the retiring Trustee and such successor Trustee shall execute and deliver any and all instruments containing such provisions as shall be necessary or desirable to transfer and confirm to, and for more fully and certainly vesting in, such successor Trustee all such rights, powers and trusts. No institution shall accept its appointment as a Trustee hereunder unless at the time of such acceptance such institution shall be qualified and eligible under this Article VII. Section 7.11. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder; provided, however, that such corporation shall be otherwise qualified and eligible under this Article VII, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Certificates shall have been executed or authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such execution or authentication and deliver the Certificates so executed or authenticated with the same effect as if such successor Trustee had itself executed or authenticated such Certificates. Section 7.12. Maintenance of Agencies. (a) With respect to each series of Certificates, there shall at all times be maintained an office or agency in the location set forth in Section 12.04 where Certificates may be presented or surrendered for registration of transfer or for exchange, and for payment thereof, and where notices and demands, to or upon the Trustee in respect of such Certificates or this Agreement may be served; provided, however, that, if it shall be necessary that the Trustee maintain an office or agency in another location with respect to the Certificates (e.g., the Certificates shall be represented by Definitive Certificates and shall be listed on a national securities exchange), the Trustee will make all reasonable efforts to establish such an office or agency. Written notice of the location of each such other office or agency and of any change of location thereof shall be given by the Trustee to the Company, any Owner Trustees, the Loan Trustees (in the case of 54 48 any Owner Trustee or Loan Trustee, at its address specified in the Note Documents or such other address as may be notified to the Trustee) and the Certificateholders. In the event that no such office or agency shall be maintained or no such notice of location or of change of location shall be given, presentations and demands may be made and notices may be served at the Corporate Trust Office of the Trustee. (b) There shall at all times be a Registrar and a Paying Agent hereunder with respect to the Certificates. Each such Authorized Agent shall be a bank or trust company, shall be a corporation organized and doing business under the laws of the United States or any state, with a combined capital and surplus of at least $75,000,000, or a corporation having a combined capital and surplus in excess of $5,000,000, the obligations of which are guaranteed by a corporation organized and doing business under the laws of the United States or any state, with a combined capital and surplus of at least $75,000,000, and shall be authorized under such laws to exercise corporate trust powers, subject to supervision by federal or state authorities. The Trustee shall initially be the Paying Agent and, as provided in Section 3.04, Registrar hereunder with respect to the Certificates. Each Registrar shall furnish to the Trustee, at stated intervals of not more than six months, and at such other times as the Trustee may request in writing, a copy of the Register maintained by such Registrar. (c) Any corporation into which any Authorized Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which any Authorized Agent shall be a party, or any corporation succeeding to the corporate trust business of any Authorized Agent, shall be the successor of such Authorized Agent, if such successor corporation is otherwise eligible under this Section 7.12, without the execution or filing of any paper or any further act on the part of the parties hereto or such Authorized Agent or such successor corporation. (d) Any Authorized Agent may at any time resign by giving written notice of resignation to the Trustee, the Company, any Owner Trustees and the Loan Trustees. The Company may, and at the request of the Trustee shall, at any time terminate the agency of any Authorized Agent by giving written notice of termination to such Authorized Agent and to the Trustee. Upon the resignation or termination of an Authorized Agent or in case at any time any such Authorized Agent shall cease to be eligible under this Section 7.12 (when, in either case, no other Authorized Agent performing the functions of such Authorized Agent shall have been appointed), the Company shall promptly appoint one or more qualified successor Authorized Agents, reasonably satisfactory to the Trustee, to perform the functions of the Authorized Agent which has resigned or whose agency has been terminated or who shall have ceased to be eligible under this Section 7.12. The Company shall give written notice of any such appointment made by it to the Trustee, any Owner Trustees and the Loan Trustees; and in each case the Trustee shall mail notice of such appointment to all Certificateholders as their names and addresses appear on the Register for such series. 55 49 (e) The Company agrees to pay, or cause to be paid, from time to time to each Authorized Agent reasonable compensation for its services and to reimburse it for its reasonable expenses. Section 7.13. Money for Certificate Payments to Be Held in Trust. All moneys deposited with any Paying Agent for the purpose of any payment on Certificates shall be deposited and held in trust for the benefit of the Certificateholders entitled to such payment, subject to the provisions of this Section 7.13. Moneys so deposited and held in trust shall constitute a separate trust fund for the benefit of the Certificateholders with respect to which such money was deposited. The Trustee may at any time, for the purpose of obtaining the satisfaction and discharge of this Agreement or for any other purpose, direct any Paying Agent to pay to the Trustee all sums held in trust by such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Section 7.14. Registration of Equipment Notes in Trustee's Name. Subject to the provisions of any Intercreditor Agreement, the Trustee agrees that all Equipment Notes to be purchased by any Trust and Permitted Investments, if any, shall be issued in the name of the Trustee as trustee for the applicable Trust or its nominee and held by the Trustee in trust for the benefit of the Certificateholders, or, if not so held, the Trustee or its nominee shall be reflected as the owner of such Equipment Notes or Permitted Investments, as the case may be, in the register of the issuer of such Equipment Notes or Permitted Investments, as the case may be. Section 7.15. Representations and Warranties of Trustee. The Trustee hereby represents and warrants, on the Transfer Date, that: (a) the Trustee is a Delaware banking corporation organized and validly existing in good standing under the laws of the State of Delaware; (b) the Trustee has full power, authority and legal right to receive the Trust Property assigned by the Related Trustee, assume the obligations under, and perform, the Assignment and Assumption Agreement, this Agreement, the Intercreditor Agreement, the Escrow Agreement and the Note Documents and has taken all necessary action to authorize such receipt, assumption and performance by it of this Agreement, the Intercreditor Agreement, the Escrow Agreement and the Note Documents to which it is a party; 56 50 (c) the receipt of the Trust Property under the Assignment and Assumption Agreement and the performance by the Trustee of the Assignment and Assumption Agreement, this Trust Supplement, the Intercreditor Agreement, the Escrow Agreement and the Note Documents (i) will not violate any provision of any United States federal law or the law of the state of the United States where it is located governing the banking and trust powers of the Trustee or any order, writ, judgment, or decree of any court, arbitrator or governmental authority applicable to the Trustee or any of its assets, (ii) will not violate any provision of the articles of association or by-laws of the Trustee, and (iii) will not violate any provision of, or constitute, with or without notice or lapse of time, a default under, or result in the creation or imposition of any lien on any properties included in the Trust Property pursuant to the provisions of any mortgage, indenture, contract, agreement or other undertaking to which it is a party, which violation, default or lien could reasonably be expected to have an adverse effect on the Trustee's performance or ability to perform its duties hereunder or thereunder or on the transactions contemplated herein or therein; (d) the receipt of the Trust Property under the Assignment and Assumption Agreement and the performance by the Trustee of the Assignment and Assumption Agreement, this Agreement, the Intercreditor Agreement, the Escrow Agreement and the Note Documents will not require the authorization, consent, or approval of, the giving of notice to, the filing or registration with, or the taking of any other action in respect of, any governmental authority or agency of the United States or the state of the United States where it is located regulating the banking and corporate trust activities of the Trustee; and (e) The Assignment and Assumption Agreement has been duly executed and delivered by the Trustee and this Agreement, the Intercreditor Agreement, the Escrow Agreement and the Note Documents have been, or will be, as applicable, duly executed and delivered by the Trustee and constitute, or will constitute, as applicable, the legal, valid and binding agreements of the Trustee, enforceable against it in accordance with their respective terms; provided, however, that enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and (ii) general principles of equity. Section 7.16. Withholding Taxes; Information Reporting. As to the Certificates, the Trustee, as trustee of the related grantor trust created by this Agreement, shall exclude and withhold from each distribution of principal, premium, if any, and interest and other amounts due under this Agreement or under the Certificates any and all withholding taxes applicable thereto as required by law. The Trustee agrees to act as such withholding agent and, in connection therewith, whenever any present or future taxes or similar charges are required to be withheld with respect to any amounts payable in respect of 57 51 the Certificates, to withhold such amounts and timely pay the same to the appropriate authority in the name of and on behalf of the Certificateholders, that it will file any necessary withholding tax returns or statements when due, and that, as promptly as possible after the payment thereof, it will deliver to each such Certificateholder appropriate documentation showing the payment thereof, together with such additional documentary evidence as such Certificateholders may reasonably request from time to time. The Trustee agrees to file any other information reports as it may be required to file under United States law. Section 7.17. Trustee's Liens. The Trustee in its individual capacity agrees that it will, in respect of each Trust created by this Agreement, at its own cost and expense promptly take any action as may be necessary to duly discharge and satisfy in full any mortgage, pledge, lien, charge, encumbrance, security interest or claim ("Trustee's Liens") on or with respect to the Trust Property of such Trust which is attributable to the Trustee either (i) in its individual capacity and which is unrelated to the transactions contemplated by this Agreement, the Intercreditor Agreement, the Note Purchase Agreement or the Note Documents or (ii) as Trustee hereunder or in its individual capacity and which arises out of acts or omissions which are not contemplated by this Agreement. Section 7.18. Preferential Collection of Claims. The Trustee shall comply with Section 311(a) of the Trust Indenture Act, excluding any creditor relationship listed in Section 311(b) of the Trust Indenture Act. If the Trustee shall resign or be removed as Trustee, it shall be subject to Section 311(a) of the Trust Indenture Act to the extent provided therein. ARTICLE VIII CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE Section 8.01. The Company to Furnish Trustee with Names and Addresses of Certificateholders. The Company will furnish to the Trustee within 15 days after each Record Date with respect to a Scheduled Payment, and at such other times as the Trustee may request in writing within 30 days after receipt by the Company of any such request, a list, in such form as the Trustee may reasonably require, of all information in the possession or control of the Company as to the names and addresses of the Certificateholders, in each case as of a date not more than 15 days prior to the time such list is furnished; provided, however, that so long as the Trustee is the sole Registrar, no such list need be furnished; and provided further, however, that no such list need be furnished for so long as a copy of the Register is being furnished to the Trustee pursuant to Section 7.12. Section 8.02. Preservation of Information; Communications to Certificateholders. The Trustee shall preserve, in as current a form as is reasonably 58 52 practicable, the names and addresses of Certificateholders contained in the most recent list furnished to the Trustee as provided in Section 7.12 or Section 8.01, as the case may be, and the names and addresses of Certificateholders of each series received by the Trustee in its capacity as Registrar, if so acting. The Trustee may destroy any list furnished to it as provided in Section 7.12 or Section 8.01, as the case may be, upon receipt of a new list so furnished. Section 8.03. Reports by Trustee. Within 60 days after May 15 of each year commencing with the first full year following the issuance of any series of Certificates, the Trustee shall transmit to the Certificateholders, as provided in Section 313(c) of the Trust Indenture Act, a brief report dated as of such May 15, if required by Section 313(a) of the Trust Indenture Act. Section 8.04. Reports by the Company. The Company shall: (a) file with the Trustee, within 30 days after the Company is required to file the same with the SEC, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may from time to time by rules and regulations prescribe) which the Company is required to file with the SEC pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934, as amended; or, if the Company is not required to file information, documents or reports pursuant to either of such sections, then to file with the Trustee and the SEC, in accordance with rules and regulations prescribed by the SEC, such of the supplementary and periodic information, documents and reports which may be required pursuant to section 13 of the Securities Exchange Act of 1934, as amended, in respect of a security listed and registered on a national securities exchange as may be prescribed in such rules and regulations; (b) file with the Trustee and the SEC, in accordance with the rules and regulations prescribed by the SEC, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of the Company provided for in this Agreement, as may be required by such rules and regulations, including, in the case of annual reports, if required by such rules and regulations, certificates or opinions of independent public accountants, conforming to the requirements of Section 1.02; (c) transmit to all Certificateholders, in the manner and to the extent provided in Section 313(c) of the Trust Indenture Act such summaries of any information, documents and reports required to be filed by the Company pursuant to subsections (a) and (b) of this Section 8.04 as may be required by rules and regulations prescribed by the SEC; and 59 53 (d) furnish to the Trustee, not less often than annually, a brief certificate from the principal executive officer, principal financial officer or principal accounting officer as to his knowledge of the Company's compliance with all conditions and covenants under this Agreement (it being understood that for purposes of this paragraph (d), such compliance shall be determined without regard to any period of grace or requirement of notice provided under this Agreement). ARTICLE IX SUPPLEMENTAL AGREEMENTS Section 9.01. Supplemental Agreements Without Consent of Certificateholders. Without the consent of the Certificateholders, the Company may (but will not be required to), and the Trustee (subject to Section 9.03) shall, at the Company's request, at any time and from time to time, enter into one or more agreements supplemental hereto or to the Intercreditor Agreement, the Escrow Agreement, the Note Purchase Agreement, the Deposit Agreement or a Liquidity Facility, in form satisfactory to the Trustee, for any of the following purposes: (a) to provide for the formation of a Trust, the issuance of a series of Certificates and other matters contemplated by Section 2.01; or (b) to evidence the succession of another corporation to the Company and the assumption by any such successor of the covenants of the Company herein contained or of the Company's obligations under the Intercreditor Agreement, the Note Purchase Agreement, the Indemnity Agreement or any Liquidity Facility or to evidence the succession of another corporation to the Depositary or any Liquidity Provider and the assumption by any such successor of the obligations of the Depositary or such Liquidity Provider, as the case may be, under the Intercreditor Agreement, the Note Purchase Agreement, the Deposit Agreement, the Indemnity Agreement or any Liquidity Facility; or (c) to add to the covenants of the Company for the benefit of the Certificateholders, or to surrender any right or power conferred upon the Company in this Agreement, the Intercreditor Agreement, the Note Purchase Agreement or any Liquidity Facility; or (d) to correct or supplement any provision in this Agreement, the Intercreditor Agreement, the Escrow Agreement, the Note Purchase Agreement, the Deposit Agreement or any Liquidity Facility which may be defective or inconsistent with any other provision herein or therein or to cure any ambiguity or to modify any 60 54 other provision with respect to matters or questions arising under this Agreement, the Intercreditor Agreement, the Escrow Agreement, the Note Purchase Agreement, the Deposit Agreement or any Liquidity Facility, provided, however, that any such action shall not materially adversely affect the interests of the Certificateholders; to correct any mistake in this Agreement, the Intercreditor Agreement or any Liquidity Facility; or, as provided in the Intercreditor Agreement, to give effect to or provide for a Replacement Liquidity Facility (as defined in the Intercreditor Agreement); or (e) to comply with any requirement of the SEC, any applicable law, rules or regulations of any exchange or quotation system on which the Certificates are listed or of any regulatory body; or (f) to modify, eliminate or add to the provisions of this Agreement, the Intercreditor Agreement or any Liquidity Facility to such extent as shall be necessary to continue the qualification of this Agreement, the Intercreditor Agreement or any Liquidity Facility (including any supplemental agreement) under the Trust Indenture Act or under any similar Federal statute hereafter enacted, and to add to this Agreement, the Intercreditor Agreement or any Liquidity Facility such other provisions as may be expressly permitted by the Trust Indenture Act, excluding, however, the provisions referred to in Section 316(a)(2) of the Trust Indenture Act as in effect at the date as of which this Agreement was executed or any corresponding provision in any similar Federal statute hereafter enacted; or (g) to evidence and provide for the acceptance of appointment under this Agreement, the Intercreditor Agreement or any Liquidity Facility by a successor Trustee and to add to or change any of the provisions of this Agreement, the Intercreditor Agreement or any Liquidity Facility as shall be necessary to provide for or facilitate the administration of the Trust, pursuant to the requirements of Section 7.10; or (h) to provide the information required under Section 7.12 and Section 12.04 as to the Trustee; or (i) to make any other amendments or modifications hereto, provided, however, that such amendments or modifications shall apply to Certificates to be thereafter issued; provided, however, that no such supplemental agreement shall adversely affect the status of any Trust as a grantor trust under Subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as amended, for U.S. federal income tax purposes. 61 55 Section 9.02. Supplemental Agreements with Consent of Certificateholders. With respect to the Trust and the Certificates, with the consent of the Certificateholders (including consents obtained in connection with a tender offer or exchange offer for the Certificates) evidencing Fractional Undivided Interests aggregating not less than a majority in interest in such Trust, by Direction of said Certificateholders delivered to the Company and the Trustee, the Company may (with the consent of the Owner Trustees, if any, relating to the Certificates, which consent shall not be unreasonably withheld), but shall not be obligated to, and the Trustee (subject to Section 9.03) shall, enter into an agreement or agreements supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement, the Intercreditor Agreement, the Escrow Agreement, the Deposit Agreement, the Note Purchase Agreement or any Liquidity Facility to the extent applicable to such Certificateholders or of modifying in any manner the rights and obligations of such Certificateholders under this Agreement, the Intercreditor Agreement, the Escrow Agreement, the Deposit Agreement, the Note Purchase Agreement or any Liquidity Facility; provided, however, that no such agreement shall, without the consent of the Certificateholder of each Outstanding Certificate affected thereby: (a) reduce in any manner the amount of, or delay the timing of, any receipt by the Trustee of payments on the Equipment Notes held in such Trust or distributions that are required to be made herein on any Certificate, or change any date of payment on any Certificate, or change the place of payment where, or the coin or currency in which, any Certificate is payable, or impair the right to institute suit for the enforcement of any such payment or distribution on or after the Regular Distribution Date or Special Distribution Date applicable thereto; or (b) permit the disposition of any Equipment Note included in the Trust Property of such Trust except as permitted by this Agreement, or otherwise deprive such Certificateholder of the benefit of the ownership of the Equipment Notes in such Trust; or (c) alter the priority of distributions specified in the Intercreditor Agreement in a manner materially adverse to the interests of the Certificateholders; or (d) reduce the specified percentage of the aggregate Fractional Undivided Interests of such Trust that is required for any such supplemental agreement, or reduce such specified percentage required for any waiver (of compliance with certain provisions of this Agreement or certain defaults hereunder and their consequences) provided for in this Agreement; or (e) modify any of the provisions of this Section 9.02 or Section 6.05, except to increase any such percentage or to provide that certain other provisions of 62 56 this Agreement cannot be modified or waived without the consent of the Certificateholder of each Certificate affected thereby; or (f) adversely affect the status of any Trust as a grantor trust under Subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as amended, for U.S. federal income tax purposes. It shall not be necessary for any Direction of such Certificateholders under this Section 9.02 to approve the particular form of any proposed supplemental agreement, but it shall be sufficient if such Direction shall approve the substance thereof. Section 9.03. Documents Affecting Immunity or Indemnity. If in the opinion of the Trustee any document required to be executed by it pursuant to the terms of Section 9.01 or 9.02 affects any interest, right, duty, immunity or indemnity in favor of the Trustee under this Agreement or any Trust Supplement, the Trustee may in its discretion decline to execute such document. Section 9.04. Execution of Supplemental Agreements. In executing, or accepting the additional trusts created by, any supplemental agreement permitted by this Article or the modifications thereby of the trusts created by this Agreement, the Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental agreement is authorized or permitted by this Agreement. Section 9.05. Effect of Supplemental Agreements. Upon the execution of any agreement supplemental to this Agreement under this Article, this Agreement shall be modified in accordance therewith, and such supplemental agreement shall form a part of this Agreement for all purposes; and every Certificateholder theretofore or thereafter authenticated and delivered hereunder shall be bound thereby to the extent applicable to such series. Section 9.06. Conformity with Trust Indenture Act. Every supplemental agreement executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. Section 9.07. Reference in Certificates to Supplemental Agreements. Certificates authenticated and delivered after the execution of any supplemental agreement pursuant to this Article may bear a notation in form approved by the Trustee as to any matter provided for in such supplemental agreement; and, in such case, suitable notation may be made upon Outstanding Certificates after proper presentation and demand. 63 57 ARTICLE X AMENDMENTS TO INDENTURE AND NOTE DOCUMENTS Section 10.01. Amendments and Supplements to Indenture and Other Note Documents. In the event that the Trustee, as holder (or beneficial owner through the Subordination Agent) of any Equipment Notes (or as a prospective purchaser of any Postponed Notes) in trust for the benefit of the Certificateholders or as Controlling Party under an Intercreditor Agreement, receives (directly or indirectly through the Subordination Agent) a request for a consent to any amendment, modification, waiver or supplement under any Indenture, other Note Document or any other related document, which request would require the consent of Certificateholders under Section 9.02 hereof, the Trustee shall forthwith send a notice of such proposed amendment, modification, waiver or supplement to each Certificateholder registered on the Register as of the date of such notice. The Trustee shall request from the Certificateholders a Direction as to (a) whether or not to take or refrain from taking (or direct the Subordination Agent to take or refrain from taking) any action which a holder of (or, with respect to Postponed Notes, a prospective purchaser of) such Equipment Note or a Controlling Party has the option to direct, (b) whether or not to give or execute (or direct the Subordination Agent to give or execute) any waivers, consents, amendments, modifications or supplements as a holder of (or, with respect to Postponed Notes, a prospective purchaser of) such Equipment Note or as Controlling Party and (c) how to vote (or direct the Subordination Agent to vote) any Equipment Note (or, with respect to a Postponed Note, its commitment to acquire such Postponed Note) if a vote has been called for with respect thereto. Provided such a request for Certificateholder Direction shall have been made, in directing any action or casting any vote or giving any consent as the holder of any Equipment Note (or in directing the Subordination Agent in any of the foregoing), (i) other than as Controlling Party, the Trustee shall vote for or give consent to any such action with respect to such Equipment Note (or Postponed Note) in the same proportion as that of (A) the aggregate face amounts of all Certificates actually voted in favor of or for giving consent to such action by such Direction of Certificateholders to (B) the aggregate face amount of all Outstanding Certificates and (ii) as Controlling Party, the Trustee shall vote as directed in such Certificateholder Direction by the Certificateholders evidencing a Fractional Undivided Interest aggregating not less than a majority in interest in the Trust. For purposes of the immediately preceding sentence, a Certificate shall have been "actually voted" if the Holder of such Certificate has delivered to the Trustee an instrument evidencing such Holder's consent to such Direction prior to one Business Day before the Trustee directs such action or casts such vote or gives such consent. Notwithstanding the foregoing, but subject to Section 6.04 and any Intercreditor Agreement, the Trustee may, with respect to the Certificates, in its own discretion and at its own direction, consent and notify the relevant Loan Trustee of such consent (or direct the Subordination Agent to consent and notify the Loan Trustee of such consent) to any amendment, modification, waiver or supplement under any related Indenture or any other related Note Document if an Event of Default hereunder 64 58 shall have occurred and be continuing or if such amendment, modification, waiver or supplement will not materially adversely affect the interests of the Certificateholders. ARTICLE XI TERMINATION OF TRUSTS Section 11.01. Termination of the Trust. The respective obligations and responsibilities of the Company and the Trustee shall terminate upon the distribution to all Certificateholders and the Trustee of all amounts required to be distributed to them pursuant to this Agreement and the disposition of all property held as part of the Trust Property; provided, however, that in no event shall the Trust continue beyond one hundred ten (110) years following the date of the execution of this Agreement. Notice of any termination, specifying the Distribution Date upon which the Certificateholders may surrender their Certificates to the Trustee for payment of the final distribution and cancellation, shall be mailed promptly by the Trustee to Certificateholders not earlier than the 60th day and not later than the 15th day next preceding such final Distribution Date specifying (A) the Distribution Date upon which the proposed final payment of the Certificates will be made upon presentation and surrender of Certificates at the office or agency of the Trustee therein specified, (B) the amount of any such proposed final payment, and (c) that the Record Date otherwise applicable to such Distribution Date is not applicable, payments being made only upon presentation and surrender of the Certificates at the office or agency of the Trustee therein specified. The Trustee shall give such notice to the Registrar at the time such notice is given to Certificateholders. Upon presentation and surrender of the Certificates in accordance with such notice, the Trustee shall cause to be distributed to Certificateholders such final payments. In the event that all of the Certificateholders shall not surrender their Certificates for cancellation within six months after the date specified in the above-mentioned written notice, the Trustee shall give a second written notice to the remaining Certificateholders to surrender their Certificates for cancellation and receive the final distribution with respect thereto. No additional interest shall accrue on the Certificates after the Distribution Date specified in the first written notice. In the event that any money held by the Trustee for the payment of distributions on the Certificates shall remain unclaimed for two years (or such lesser time as the Trustee shall be satisfied, after sixty days' notice from the Company, is one month prior to the escheat period provided under applicable law) after the final distribution date with respect thereto, the Trustee shall pay to each Loan Trustee the appropriate amount of money relating to such Loan Trustee and shall give written notice thereof to the related Owner Trustees, the Owner Participants and the Company. 65 59 ARTICLE XII MISCELLANEOUS PROVISIONS Section 12.01. Limitation on Rights of Certificateholders. The death or incapacity of any Certificateholder shall not operate to terminate this Agreement or the Trust, nor entitle such Certificateholder's legal representatives or heirs to claim an accounting or to take any action or commence any proceeding in any court for a partition or winding up of the Trust, nor otherwise affect the rights, obligations, and liabilities of the parties hereto or any of them. Section 12.02. Liabilities of Certificateholders. Neither the existence of the Trust nor any provision in this Agreement is intended to or shall limit the liability the Certificateholders would otherwise incur if the Certificateholders owned Trust Property as co-owners, or incurred any obligations of the Trust, directly rather than through the Trust. Section 12.03. Registration of Equipment Notes in Name of Subordination Agent. If the Trust is party to the Intercreditor Agreement, the Trustee agrees that all Equipment Notes to be purchased by such Trust shall be issued in the name of the Subordination Agent under the Intercreditor Agreement or its nominee and held by such Subordination Agent in trust for the benefit of the Certificateholders, or, if not so held, such Subordination Agent or its nominee shall be reflected as the owner of such Equipment Notes in the register of the issuer of such Equipment Notes. Section 12.04. Notices. (a) Unless otherwise specifically provided herein, all notices required under the terms and provisions of this Agreement shall be in English and in writing, and any such notice may be given by United States mail, courier service or telecopy, and any such notice shall be effective when delivered or received or, if mailed, three days after deposit in the United States mail with proper postage for ordinary mail prepaid, (i) if to the Company: Atlas Air, Inc. 538 Commons Drive Golden, CO 80401 Attention: Chief Financial Officer Facsimile: (303) 526-5051 (ii) if to the Trustee: Wilmington Trust Company One Rodney Square 66 60 1100 N. Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Department Facsimile: (302) 651-8882 (b) The Company or the Trustee, by notice to the other, may designate additional or different addresses for subsequent notices or communications. (c) Any notice or communication to Certificateholders shall be mailed by first-class mail to the addresses for Certificateholders shown on the Register kept by the Registrar and to addresses filed with the Trustee for Certificate Owners. Failure so to mail a notice or communication or any defect in such notice or communication shall not affect its sufficiency with respect to other Certificateholders or Certificate Owners. (d) If a notice or communication is mailed in the manner provided above within the time prescribed, it is conclusively presumed to have been duly given, whether or not the addressee receives it. (e) If the Company mails a notice or communication to the Certificateholders, it shall mail a copy to the Trustee and to each Paying Agent for such series at the same time. (f) Notwithstanding the foregoing, all communications or notices to the Trustee shall be deemed to be given only when received by a Responsible Officer of the Trustee. (g) The Trustee shall promptly furnish the Company with a copy of any demand, notice or written communication received by the Trustee hereunder from any Certificateholder, Owner Trustee or Loan Trustee. Section 12.05. Governing Law. THIS AGREEMENT HAS BEEN DELIVERED IN THE STATE OF NEW YORK AND, TOGETHER WITH THE CERTIFICATES, SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. Section 12.06. Severability of Provisions. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions, or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of 67 61 this Agreement or the Trust, or of the Certificates or the rights of the Certificateholders thereof. Section 12.07. Trust Indenture Act Controls. Upon the occurrence of any Registration Event, this Agreement shall become subject to the provisions of the Trust Indenture Act and shall, to the extent applicable, be governed by such provisions. From and after any Registration Event, if any provision of this Agreement limits, qualifies or conflicts with another provision which is required to be included in this Agreement by the Trust Indenture Act, the required provision shall control. Section 12.08. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. Section 12.09. Successors and Assigns. All covenants, agreements, representations and warranties in this Agreement by the Trustee and the Company shall bind and, to the extent permitted hereby, shall inure to the benefit of and be enforceable by their respective successors and assigns, whether so expressed or not. Section 12.10. Benefits of Agreement. Nothing in this Agreement or in the Certificates, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, and the Certificateholders, any benefit or any legal or equitable right, remedy or claim under this Agreement. Section 12.11. Legal Holidays. In any case where any Regular Distribution Date or Special Distribution Date relating to any Certificate shall not be a Business Day, then (notwithstanding any other provision of this Agreement) payment need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on such Regular Distribution Date or Special Distribution Date, and no interest shall accrue during the intervening period. Section 12.12. Counterparts. For the purpose of facilitating the execution of this Agreement and for other purposes, this Agreement may be executed simultaneously in any number of counterparts, each of which counterparts shall be deemed to be an original, and all of which counterparts shall constitute but one and the same instrument. Section 12.13. Communication by Certificateholders with Other Certificateholders. Certificateholders may communicate with other Certificateholders with respect to their rights under this Agreement or the Certificates pursuant to Section 312(b) of the Trust Indenture Act. The Company, the Trustee and any and all other persons benefitted by this Agreement shall have the protection afforded by Section 312(c) of the Trust Indenture Act. 68 62 Section 12.14. Intention of Parties. The parties hereto intend that each Trust be classified for U.S. federal income tax purposes as a grantor trust under Subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as amended, and not as a trust or association taxable as a corporation or as a partnership. The Trustee agrees to hold all assets of each Trust for investment purposes only. Each Certificateholder and Investor, by its acceptance of its Certificate or a beneficial interest therein, agrees to treat the Trust as a grantor trust for all U.S. federal, state and local income tax purposes. The powers granted and obligations undertaken pursuant to this Agreement shall be so construed so as to further such intent. 69 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed by their respective officers hereunto duly authorized as of the day and year first written above. ATLAS AIR, INC. By: /s/ RICHARD H. SHUYLER ------------------------------------- Name: Richard H. Shuyler Title: Chief Financial Officer, Sr. Vice Pres., Finance; and Corporate Treasurer WILMINGTON TRUST COMPANY, as Trustee By: /s/ JAMES P. LAWLER ------------------------------------- Name: JAMES P. LAWLER Title: Vice President EX-10.96 10 DEPOSIT AGREEMENT CLASS A 1 EXHIBIT 10.96 EXECUTION COPY - -------------------------------------------------------------------------------- DEPOSIT AGREEMENT (Class A) Dated as of February 9, 1998 between FIRST SECURITY BANK, NATIONAL ASSOCIATION as Escrow Agent and ABN AMRO BANK N.V., acting through its Chicago Branch, as Depositary - -------------------------------------------------------------------------------- 2 DEPOSIT AGREEMENT (Class A) dated as of February 9, 1998 (as amended, modified or supplemented from time to time, this "Agreement") between First Security Bank, National Association, a national banking association, as Escrow Agent under the Escrow and Paying Agent Agreement referred to below (in such capacity, together with its successors in such capacity, the "Escrow Agent"), and ABN AMRO Bank N.V., a banking institution organized under the laws of the Netherlands, acting through its Chicago Branch, as depositary bank ("ABN AMRO" and, in its capacity as depositary hereunder, the "Depositary"). W I T N E S S E T H WHEREAS, Atlas Air, Inc. ("Atlas") and Wilmington Trust Company, not in its individual capacity except as otherwise expressly provided therein, but solely as trustee (in such capacity, together with its successors in such capacity, the "Pass Through Trustee") have entered into the Pass Through Trust Agreement dated as of February 9, 1998 (together, as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Pass Through Trust Agreement") relating to Atlas Air, Inc. Pass Through Trust 1998-1A-O pursuant to which the Atlas Air, Inc. Pass Through Trust, Series 1998-1A Certificates referred to therein (the "Certificates") are being issued; WHEREAS, Atlas and Morgan Stanley & Co. Incorporated, BT Alex. Brown Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co. (collectively, the "Placement Agents" and, together with their respective transferees and assigns as registered owners of the Certificates, the "Investors") have entered into a Placement Agreement dated as of January 27, 1998 pursuant to which the Pass Through Trustee will issue and sell the Certificates to the Placement Agents; WHEREAS, the Investors are entitled to the benefits of a Registration Rights Agreement (the "Registration Rights Agreement"), dated as of the date hereof, pursuant to which the Company will file a registration statement with the Securities and Exchange Commission registering the Certificates (or the Exchange Certificates referred to in the Registration Rights Agreement) under the Securities Act of 1933, as amended; WHEREAS, Atlas, the Pass Through Trustee, certain other pass through trustees and certain other persons concurrently herewith are entering into the Note Purchase Agreement, dated as of the date hereof (the "Note Purchase Agreement"), pursuant to which the Pass Through Trustee has agreed to acquire, subject to the terms thereof, from time to time on or prior to the Delivery Period Termination Date (as defined in the Note Purchase Agreement) equipment notes (the "Equipment Notes") issued to finance the acquisition of aircraft by Atlas, as lessee or as owner, utilizing a portion of the proceeds from the sale of the Certificates (the "Net Proceeds"); WHEREAS, the Escrow Agent, the Placement Agents, the Pass Through Trustee and Wilmington Trust Company, as paying agent for the Escrow Agent (in such 3 capacity, together with its successors in such capacity, the "Paying Agent") concurrently herewith are entering into an Escrow and Paying Agent Agreement, dated as of the date hereof (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Escrow Agreement"); WHEREAS, Atlas and the Depositary concurrently herewith are entering into an Indemnity Agreement, dated as of the date hereof (the "Indemnity Agreement"); and WHEREAS, the Placement Agents and the Pass Through Trustee intend that the Net Proceeds be held in escrow by the Escrow Agent on behalf of the Investors pursuant to the Escrow Agreement, subject to withdrawal upon request of and proper certification by the Pass Through Trustee for the purpose of purchasing Equipment Notes, and that pending such withdrawal the Net Proceeds be deposited by the Escrow Agent with the Depositary pursuant to this Agreement, which provides for the Depositary to pay interest for distribution to the Investors and to establish accounts from which the Escrow Agent shall make withdrawals upon request of and proper certification by the Pass Through Trustee. NOW, THEREFORE, in consideration of the obligations contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1.1 Acceptance of Depositary. The Depositary hereby agrees to act as depositary bank as provided herein and in connection therewith to accept all amounts to be delivered to or held by the Depositary pursuant to the terms of this Agreement. The Depositary further agrees to hold, maintain and safeguard the Deposits and the Accounts (as defined below) during the term of this Agreement in accordance with the provisions of this Agreement. The Escrow Agent shall not have any right to withdraw, assign or otherwise transfer moneys held in the Accounts except as permitted by this Agreement. SECTION 1.2 Establishment of Accounts. The Escrow Agent hereby instructs the Depositary, and the Depositary agrees, to establish the separate deposit accounts listed on Schedule I hereto and to establish such additional separate deposit accounts as may be required in connection with the deposits contemplated by Section 2.4 hereof (each, an "Account" and collectively, the "Accounts"), each in the name of the Escrow Agent and all on the terms and conditions set forth in this Agreement. SECTION 2.1 Deposits. The Escrow Agent shall direct the Placement Agents to deposit with the Depositary on the date of this Agreement (the "Deposit Date") in Federal (same day) funds by wire transfer to: ABN AMRO Bank N.V., Chicago Branch, Reference: Atlas 1998-1, and the Depositary shall accept from the Placement Agents, on behalf of the Escrow Agent, the sum of US$300,254,000. Upon acceptance of such sum, the Depositary shall (i) establish each of the deposits specified in Schedule I hereto maturing on the respective dates (each such date, as it may be extended from time to time in accordance with the Indemnity Agreement, through the Delivery Period Termination Date, a "Maturity 2 4 Date") set forth therein (including any deposit made pursuant to Section 2.4 hereof, individually, a "Deposit" and, collectively, the "Deposits") and (ii) credit each Deposit to the related Account as set forth therein. No amount shall be deposited in any Account other than the related Deposit. SECTION 2.2 Interest. The Depositary shall pay interest on each Deposit from and including the date of deposit to but excluding the earlier of (x) the date of withdrawal and (y) the Maturity Date thereof at the rate (the "Public Rate") of 7.38% per annum (computed on the basis of a year of twelve 30-day months) payable to the Paying Agent on behalf of the Escrow Agent semi-annually in arrears on each January 2 and July 2, and on the date of the Final Withdrawal (as defined below), commencing on July 2, 1998 (each, an "Interest Payment Date"), all in accordance with the terms of this Agreement (whether or not any such Deposit is withdrawn on an Interest Payment Date); provided, however, that in the event that no Registration Event (as defined in the Registration Rights Agreement) occurs on or prior to the 180th day after the date of the issuance of the Certificates (the "Registration Date"), the interest rate per annum paid by the Depositary on each Deposit shall be increased by 0.50%, effective from and including August 9, 1998, to but excluding the date on which a Registration Event occurs; and provided, further, that in the event that a Shelf Registration Statement (as defined in the Registration Rights Agreement) ceases to be effective for more than 60 days, whether or not consecutive, during any 12-month period at any time before the earlier of (a) the second anniversary of the date hereof or (b) the sale pursuant to the Shelf Registration Statement of all the Certificates covered thereby, the interest rate per annum paid by the Depositary on each Deposit shall be increased by 0.50% per annum from the 61st day of the applicable 12-month period such Shelf Registration Statement ceases to be effective until such time as the Shelf Registration Statement again becomes effective. Interest accrued on any Deposit that is withdrawn pursuant to a Notice of Purchase Withdrawal (as defined below) shall be paid on the next Interest Payment Date, notwithstanding any intervening Final Withdrawal (as defined below). SECTION 2.3 Withdrawals. (a) On and after the date seven days after the establishment of any Deposit, the Escrow Agent may, by providing at least one Business Day's prior notice of withdrawal to the Depositary in the form of Exhibit A hereto (a "Notice of Purchase Withdrawal"), withdraw not less than the entire balance of such Deposit, except that at any time prior to the actual withdrawal of such Deposit, the Escrow Agent or the Pass Through Trustee may, by notice to the Depositary, cancel such withdrawal (including on the scheduled date therefor), and thereafter such Deposit shall continue to be maintained by the Depositary in accordance with the original terms thereof. Following such withdrawal the balance in the related Account shall be zero and the Depositary shall close such Account. As used herein, "Business Day" means any day, other than a Saturday, Sunday or other day on which commercial banks are authorized or required by law to close in New York, New York, Chicago, Illinois, Denver, Colorado or Wilmington, Delaware. 3 5 (b) The Escrow Agent may, by providing at least 15 days' prior notice of withdrawal to the Depositary in the form of Exhibit B hereto (a "Notice of Prepayment Withdrawal"), withdraw not less than the entire balance of any Deposit together with all accrued and unpaid interest on such Deposit to but excluding the specified date of withdrawal (a "Prepayment Withdrawal"), on such date as shall be specified in such Notice of Prepayment Withdrawal. Following such withdrawal the balance in the related Account shall be zero and the Depositary shall close such Account. Upon any Prepayment Withdrawal, the Depositary shall (i) pay to the Paying Agent an amount equal to excess of the aggregate amount of all Deposits on deposit immediately prior to such Prepayment Withdrawal over the sum of the maximum principal amount of Equipment Notes that may be acquired with funds withdrawn from all Deposits not being withdrawn pursuant to such Notice of Prepayment Withdrawal and (ii) redeposit the remainder, if any, of such Prepayment Withdrawal in accordance with Section 2.4 hereof. (c) The Escrow Agent may, by providing at least 15 days' prior notice of withdrawal to the Depositary in the form of Exhibit C hereto (a "Notice of Final Withdrawal"), withdraw the entire amount of all of the remaining Deposits together with the all accrued and unpaid interest on such Deposits to but excluding the specified date of withdrawal (a "Final Withdrawal"), on such date as shall be specified in such Notice of Final Withdrawal. Following such withdrawal the balance in the related Accounts shall be zero and the Depositary shall close such Accounts. If a Notice of Final Withdrawal has not been given to the Depositary on or before June 29, 1999 (provided, that if a labor strike or work stoppage occurs at The Boeing Company prior to such date, such date shall be extended by adding thereto the number of days that each such labor strike or work stoppage continues in effect but in no event shall any such extension result in a Deposit being held by the Depositary past such Deposit's then scheduled maturity date (subject to extension pursuant to the Indemnity Agreement)) and there are unwithdrawn Deposits on such date, the Depositary shall pay the amount of the Final Withdrawal to the Paying Agent on the Delivery Period Termination Date. (d) If the Depositary receives a duly completed Notice of Purchase Withdrawal, Notice of Prepayment Withdrawal or Notice of Final Withdrawal complying with the provisions of this Agreement, it shall make the payments specified therein in accordance with the provisions of this Agreement. SECTION 2.4 Other Accounts. On the date of withdrawal of any Deposit, the Escrow Agent, or the Pass Through Trustee on behalf of the Escrow Agent, shall be entitled to re-deposit with the Depositary any portion thereof and the Depositary shall accept the same for deposit hereunder; provided, however, that the Depositary shall have no obligation to accept such amounts for deposit if Atlas, at or prior to such time, shall not have complied with the provisions of Section 3(b) of the Indemnity Agreement. Any sums so received for deposit shall be established as a new Deposit and credited to a new Account, all as more fully provided in Section 2.1 hereof, and thereafter the provisions of this Agreement shall apply thereto as fully and with the same force and effect as if such Deposit had been 4 6 established on the Deposit Date except that (i) such Deposit may not be withdrawn prior to the date seven days after the establishment thereof and (ii) such Deposit shall mature on December 30, 1998, as such date may be extended from time to time in accordance with the Indemnity Agreement through the Delivery Period Termination Date. SECTION 2.5 Reset of Maturity Date. If a Registration Event has not occurred on the Registration Date, unless Atlas has complied with Section 3(c) of the Indemnity Agreement, the Maturity Date for the Deposit then held by the Depositary with respect to the final Aircraft to be delivered to Atlas as contemplated by the Note Purchase Agreement shall be reset to the date (the "Reset Date") that the Depositary reasonably determines to be the date on which the sum of (x) interest accrued on the balances of all Deposits hereunder from the date of calculation through the Reset Date at the then current Deposit Rate plus (y) the balance of the Collateral Account as at such date of calculation will be equal to the interest that will have accrued on the Deposits hereunder from such date of calculation through the Reset Date at the Public Rate (assuming all scheduled payments are made on each Interest Payment Date occurring on or prior to the Reset Date and each then remaining Deposit is withdrawn on its then scheduled Maturity Date). The Depositary shall use reasonable efforts to determine the amounts necessary to determine the Reset Date, and such determination shall be conclusive absent manifest error. Any reset of such Maturity Date pursuant to this Section 2.5 shall be without prejudice to Atlas' right to re-extend such Maturity Date by posting additional collateral pursuant to Section 3(a) of the Indemnity Agreement. SECTION 3.1 Termination. This Agreement shall terminate on the later of the date on which (i) all of the Deposits shall have been withdrawn and paid as provided herein without any re-deposit and (ii) all accrued and unpaid interest on the Deposits shall have been paid as provided herein, but in no event prior to the date on which the Depositary shall have performed in full its obligations hereunder. SECTION 3.2 Substitute Depositary. In the event that Atlas is required under the provisions of Section 9 or Section 10 of the Indemnity Agreement to make payments in a material amount to the Depositary, Atlas may elect to terminate the Depositary as a party to this Agreement, the other Deposit Agreements and the Indemnity Agreement; provided that, concurrently with such termination, (i) Atlas shall pay the Depositary all amounts (including, without limitation, amounts, if any, owed under such Section 9 and Section 10) owed to the Depositary pursuant to any such Agreement through such date of termination, (ii) another financial institution satisfactory to Atlas and the Rating Agencies (as defined in the Note Purchase Agreement) shall agree, as of such date, to assume all rights and obligations of the Depositary under all such Agreements to be terminated as of such date, and (iii) all documents and supporting materials necessary to evidence the termination of the Depositary and the substitution of such other financial institution shall have been received as of such date. 5 7 SECTION 4. Payments. All payments (including, without limitation, those payments made in respect of Taxes (as defined and provided for below)) made by the Depositary hereunder shall be paid in United States Dollars and immediately available funds by wire transfer (i) in the case of accrued interest on the Deposits payable under Section 2.2 hereof or any Final Withdrawal, directly to the Paying Agent at Wilmington Trust Company, Wilmington, Delaware, ABA# 03-11-000-92, Account No. 44043-0, Attention: Robert Hines, Reference: Atlas Air, or to such other account as the Paying Agent may direct from time to time in writing to the Depositary and the Escrow Agent and (ii) in the case of any withdrawal of one or more Deposits pursuant to a Notice of Purchase Withdrawal, directly to or as directed by the Pass Through Trustee as specified and in the manner provided in such Notice of Purchase Withdrawal. The Depositary hereby waives any and all rights of set-off, combination of accounts, right of retention or similar right (whether arising under applicable law, contract or otherwise) it may have against the Deposits howsoever arising. All payments on or in respect of each Deposit shall be made free and clear of and without reduction for or on account of any and all taxes, levies or other impositions or charges (collectively, "Taxes"). However, if the Depositary or the Paying Agent (pursuant to Section 2.04 of the Escrow Agreement) shall be required by law to deduct or withhold any Taxes from or in respect of any sum payable hereunder, the Depositary shall (i) make such deductions or withholding, (ii) pay the full amount deducted or withheld (including in respect of such additional amounts) to the competent taxation authority and (iii) if the Taxes required to be deducted or withheld are imposed by the Netherlands or any political subdivision thereof, pay such additional amounts as may be necessary in order that the actual amount received by the designated recipient of such sum under this Agreement or the Escrow Agreement after such deduction or withholding equals the sum it would have received had no such deduction or withholding been required. If the date on which any payment due on any Deposit would otherwise fall on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day, and no additional interest shall accrue in respect of such extension. SECTION 5. Representation and Warranties. The Depositary hereby represents and warrants to Atlas, the Escrow Agent, the Pass Through Trustee and the Paying Agent that: (a) it is a bank duly organized and validly existing in good standing under the laws of the Netherlands and is duly qualified to conduct banking business in the State of Illinois through its Chicago Branch; (b) it has full power, authority and legal right to conduct its business and operations as currently conducted and to enter into and perform its obligations under this Agreement; (c) the execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action on the part of it and do not require any stockholder approval, or approval or consent of any trustee or holder of any 6 8 indebtedness or obligations of it, and such document has been duly executed and delivered by it and constitutes its legal, valid and binding obligations enforceable against it in accordance with the terms hereof; (d) no authorization, consent or approval of or other action by, and no notice to or filing with, any United States federal or state governmental authority or regulatory body is required for the execution, delivery or performance by it of this Agreement; (e) neither the execution, delivery or performance by it of this Agreement, nor compliance with the terms and provisions hereof, conflicts or will conflict with or results or will result in a breach or violation of any of the terms, conditions or provisions of, or will require any consent or approval under, any law, governmental rule or regulation or the charter documents, as amended, or bylaws, as amended, of it or any similar instrument binding on it or any order, writ, injunction or decree of any court or governmental authority against it or by which it or any of its properties is bound or any indenture, mortgage or contract or other agreement or instrument to which it is a party or by which it or any of its properties is bound, or constitutes or will constitute a default thereunder or results or will result in the imposition of any lien upon any of its properties; (f) there are no pending or, to its knowledge, threatened actions, suits, investigations or proceedings (whether or not purportedly on behalf of it) against or affecting it or any of its property before or by any court or administrative agency which, if adversely determined, (i) would adversely affect the ability of it to perform its obligations under this Agreement or (ii) would call into question or challenge the validity of this Agreement or the enforceability hereof in accordance with the terms hereof, nor is the Depositary in default with respect to any order of any court, governmental authority, arbitration board or administrative agency so as to adversely affect its ability to perform its obligations under this Agreement; and (g) the Depositary will make all payments under this Agreement from its own funds and not from funds provided by, or on deposit from, Atlas or any of its subsidiaries. SECTION 6. Transfer. Neither party hereto shall be entitled to assign or otherwise transfer this Agreement (or any interest herein) other than (in the case of the Escrow Agent) to a successor escrow agent under the Escrow Agreement, and any purported assignment in violation thereof shall be void. This Agreement shall be binding upon the parties hereto and their respective successors and (in the case of the Escrow Agent) permitted assigns. Upon the occurrence of the Transfer (as defined below) contemplated by the Assignment and Assumption Agreement (as defined below), the Pass Through Trustee shall (without further act) be deemed to have transferred all of its right, title and interest in and to this Agreement to the trustee of the Successor Trust (as defined below) and, thereafter, the 7 9 trustee of the Successor Trust shall be deemed to be the "Pass Through Trustee" hereunder with the rights of the "Pass Through Trustee" hereunder, and each reference herein to "Atlas Air, Inc. Pass Through Trust 1998-1A-O" shall be deemed to be a reference to "Atlas Air Inc. Pass Through Trust 1998-1A-S". The Escrow Agent and the Depositary hereby acknowledge and consent to the Transfer contemplated by the Assignment and Assumption Agreement. For the purposes of this Section 6, "Transfer" means the transfer contemplated by the Assignment and Assumption Agreement; "Assignment and Assumption Agreement" means the Assignment and Assumption Agreement to be entered into between the Pass Through Trustee and the trustee of the Successor Trust, substantially in the form of Exhibit E to the Pass Through Trust Agreement; and "Successor Trust" means the Atlas Air, Inc. Pass Through Trust 1998-1A-S. SECTION 7. Amendment, Etc. This Agreement may not be amended, waived or otherwise modified except by an instrument in writing signed by the party against whom the amendment, waiver or other modification is sought to be enforced and by the Pass Through Trustee. SECTION 8. Notices. Unless otherwise expressly specified or permitted by the terms hereof, all notices, requests, demands, authorizations, directions, consents, waivers or documents provided or permitted by this Agreement to be made, given, furnished or filed shall be in writing, mailed by certified mail, postage prepaid, or by confirmed telecopy and 8 10 (i) if to the Escrow Agent, addressed to at its office at: FIRST SECURITY BANK, NATIONAL ASSOCIATION 79 South Main Street Salt Lake City, UT 84111 Attention: Corporate Trust Department Telecopier: 801-246-5053 (ii) if to the Depositary, addressed to it at its offices at: ABN AMRO BANK N.V., Chicago Branch 135 South LaSalle Street, Suite 660 Chicago, IL 60674-9135 Attention: Claudia Heldring Telecopier: 312-606-8428 and ABN AMRO BANK N.V., Chicago Branch 181 W. Madison Street Chicago, IL 60602 Attention: Money Markets Desk Telecopier: 312-904-9106 (iii) in each case, with a copy to the Pass Through Trustee, addressed to it at its office at: WILMINGTON TRUST COMPANY One Rodney Square 1100 N. Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Telecopy: 302-651-8882 and to Atlas, addressed to it at its office at: ATLAS AIR, INC. 538 Commons Drive Golden, CO 80401 Attention: Chief Financial Officer Telecopier: 303-526-5051 9 11 Whenever any notice in writing is required to be given by either of the Escrow Agent or the Depositary to the other, such notice shall be deemed given and such requirement satisfied when such notice is received. Any party hereto may change the address to which notices to such party will be sent by giving notice of such change to the other party to this Agreement. On or prior to the execution of this Agreement, the Escrow Agent has delivered to the Depositary a certificate containing specimen signatures of the representatives of the Escrow Agent who are authorized to give notices and instructions with respect to this Agreement. The Depositary may conclusively rely on such certificate until the Depositary receives written notice from the Escrow Agent to the contrary. SECTION 9. Obligations Unconditional. The Depositary hereby acknowledges and agrees that its obligation to repay each Deposit together with interest thereon as provided herein is absolute, irrevocable and unconditional and constitutes a full recourse obligation of the Depositary enforceable against it to the full extent of all of its assets and properties. SECTION 10. Entire Agreement. This Agreement (including all attachments hereto) sets forth all of the promises, covenants, agreements, conditions and understandings between the Depositary and the Escrow Agent with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and undertakings, inducements or conditions, express or implied, oral or written. SECTION 11. Governing Law. This Agreement, and the rights and obligations of the Depositary and the Escrow Agent with respect to the Deposits, shall be governed by, and construed in accordance with, the laws of the State of New York and subject to the provisions of Regulation D of the Board of Governors of the Federal Reserve System (or any successor), as the same may be modified and supplemented and in effect from time to time. SECTION 12. Waiver of Jury Trial Right. EACH OF THE DEPOSITARY AND THE ESCROW AGENT ACKNOWLEDGES AND ACCEPTS THAT IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT SUCH PARTY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY IRREVOCABLY WAIVES, TO THE GREATEST EXTENT PERMISSIBLE BY LAW, ITS RIGHT TO A TRIAL BY JURY. SECTION 13. Counterparts. This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one instrument. 10 12 SECTION 14. Depositary's Obligations. The Depositary and the Escrow Agent understand and agree that in connection with this Agreement, the Depositary is not acting as a fiduciary, agent of other representative of the Escrow Agent, the Pass Through Trustees, the Placement Agents or anyone else, and has no and shall have no obligation to monitor, account for or otherwise concern itself with the source of funds invested hereunder or the application of such funds or of payments made by the Depositary hereunder and in accordance with the terms hereof. 11 13 IN WITNESS WHEREOF, the Escrow Agent and the Depositary have caused this Deposit Agreement to be duly executed as of the day and year first above written. FIRST SECURITY BANK, NATIONAL ASSOCIATION as Escrow Agent By /s/ C. SCOTT NIELSEN ------------------------------------ Name: C. Scott Nielsen Title: Vice President ABN AMRO BANK N.V., Chicago Branch as Depositary By /s/ CLAUDIA C. HELDRING ------------------------------------ Name: Claudia C. Heldring Title: Vice President By /s/ LUKAS van der HOEF ------------------------------------ Name: Lukas van der Hoef Title: Vice President 14 Schedule I Schedule of Deposits (Class A)
Date Deposit Amount Account No. Maturity Date ---- -------------- ----------- ------------- 2/9/98 7/31/98 2/9/98 8/31/98 2/9/98 10/30/98 2/9/98 11/30/98 2/9/98 12/31/98
[Note: The portion of proceeds of the sale of Class A Certificates deposited into each account will be equal to, in the case of the first four accounts, the maximum principal amount of Equipment Notes that may be purchased with the funds in each such Deposit and, in the case of the final account, any remaining proceeds.] 15 EXHIBIT A NOTICE OF PURCHASE WITHDRAWAL ABN AMRO BANK N.V., Chicago Branch 135 South LaSalle Street, Suite 660 Chicago, IL 60674-9135 Attention: Claudia Heldring Telecopier: 312-606-8428 ABN AMRO BANK N.V., Chicago Branch 181 W. Madison Street Chicago, IL 60602 Attention: Money Markets Desk Telecopier: 312-904-9106 Gentlemen: Reference is made to the Deposit Agreement (Class A) dated as of February 9, 1998 (the "Deposit Agreement") between First Security Bank, N.A., as Escrow Agent, and ABN AMRO Bank N.V., Chicago Branch, as Depositary (the "Depositary"). In accordance with Section 2.3(a) of the Deposit Agreement, the undersigned hereby requests the withdrawal of the entire amount of the Deposit, $_______, Account No. ____________. The undersigned hereby directs the Depositary to pay the proceeds of the Deposit to ________________, Account No. _____, Reference: _________ on _________ __, 199_, upon the telephonic request of a representative reasonably believed by the Depositary to be that of the Pass Through Trustee. FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Escrow Agent By ------------------------------------ Name: Title: Dated: _______ __, 199_ 16 EXHIBIT B NOTICE OF PREPAYMENT WITHDRAWAL ABN AMRO BANK N.V., Chicago Branch 135 South LaSalle Street, Suite 660 Chicago, IL 60674-9135 Attention: Claudia Heldring Telecopier: 312-606-8428 ABN AMRO BANK N.V., Chicago Branch 181 W. Madison Street Chicago, IL 60602 Attention: Money Markets Desk Telecopier: 312-904-9106 Gentlemen: Reference is made to the Deposit Agreement (Class A) dated as of February 9, 1998 (the "Deposit Agreement") between First Security Bank, N.A., as Escrow Agent, and ABN AMRO Bank N.V., Chicago Branch, as Depositary (the "Depositary"). In accordance with Section 2.3(B) of the Deposit Agreement, the undersigned hereby requests the withdrawal of the entire amount of the Deposit, $_______, Account No. ____________. The undersigned hereby directs the Depositary (i) to pay to the Paying Agent at Wilmington Trust Company, ABA# 03-11-000-92, Account No.44043-0, Reference: Atlas Air, out of the proceeds of the Deposit and accrued interest thereon, $________, representing the amount equal to excess of (x) the aggregate amount of all Deposits on deposit immediately prior to such withdrawal over (y) the sum of the maximum principal amount of Equipment Notes that may be acquired with funds withdrawn from all Deposits not being withdrawn pursuant to this Notice of Prepayment Withdrawal and (ii) to redeposit 17 in accordance with Section 2.4 of the Deposit Agreement the remainder, if any, of the amount withdrawn pursuant hereto. FIRST SECURITY BANK, - NATIONAL ASSOCIATION, as Escrow Agent By ------------------------------------ Name: Title: Dated: _______ __, 199_ 18 EXHIBIT C NOTICE OF FINAL WITHDRAWAL ABN AMRO BANK N.V., Chicago Branch 135 South LaSalle Street, Suite 660 Chicago, IL 60674-9135 Attention: Claudia Heldring Telecopier: 312-606-8428 ABN AMRO BANK N.V., Chicago Branch 181 W. Madison Street Chicago, IL 60602 Attention: Money Markets Desk Telecopier: 312-904-9106 Gentlemen: Reference is made to the Deposit Agreement (Class A) dated as of February 9, 1998 (the "Deposit Agreement") between First Security Bank, N.A., as Escrow Agent, and ABN AMRO Bank N.V., Chicago Branch, as Depositary (the "Depositary"). In accordance with Section 2.3(b) of the Deposit Agreement, the undersigned hereby requests the withdrawal of the entire amount of all Deposits. The undersigned hereby directs the Depositary to pay the proceeds of the Deposits and accrued interest thereon to the Paying Agent at Wilmington Trust Company, ABA# 03-11-000-92, Account No. 44043-0, Reference: Atlas Air. FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Escrow Agent By ------------------------------------ Name: Title: Dated: _______ __, 199_ EX-10.97 11 DEPOSIT AGREEMENT CLASS B 1 EXHIBIT 10.97 EXECUTION COPY - -------------------------------------------------------------------------------- DEPOSIT AGREEMENT (Class B) Dated as of February 9, 1998 between FIRST SECURITY BANK, NATIONAL ASSOCIATION as Escrow Agent and ABN AMRO BANK N.V., acting through its Chicago Branch, as Depositary - -------------------------------------------------------------------------------- 2 DEPOSIT AGREEMENT (Class B) dated as of February 9, 1998 (as amended, modified or supplemented from time to time, this "Agreement") between First Security Bank, National Association, a national banking association, as Escrow Agent under the Escrow and Paying Agent Agreement referred to below (in such capacity, together with its successors in such capacity, the "Escrow Agent"), and ABN AMRO Bank N.V., a banking institution organized under the laws of the Netherlands, acting through its Chicago Branch, as depositary bank ("ABN AMRO" and, in its capacity as depositary hereunder, the "Depositary"). W I T N E S S E T H WHEREAS, Atlas Air, Inc. ("Atlas") and Wilmington Trust Company, not in its individual capacity except as otherwise expressly provided therein, but solely as trustee (in such capacity, together with its successors in such capacity, the "Pass Through Trustee") have entered into the Pass Through Trust Agreement dated as of February 9, 1998 (together, as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Pass Through Trust Agreement") relating to Atlas Air, Inc. Pass Through Trust 1998-1B-O pursuant to which the Atlas Air, Inc. Pass Through Trust, Series 1998-1B Certificates referred to therein (the "Certificates") are being issued; WHEREAS, Atlas and Morgan Stanley & Co. Incorporated, BT Alex. Brown Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co. (collectively, the "Placement Agents" and, together with their respective transferees and assigns as registered owners of the Certificates, the "Investors") have entered into a Placement Agreement dated as of January 27, 1998 pursuant to which the Pass Through Trustee will issue and sell the Certificates to the Placement Agents; WHEREAS, the Investors are entitled to the benefits of a Registration Rights Agreement (the "Registration Rights Agreement"), dated as of the date hereof, pursuant to which the Company will file a registration statement with the Securities and Exchange Commission registering the Certificates (or the Exchange Certificates referred to in the Registration Rights Agreement) under the Securities Act of 1933, as amended; WHEREAS, Atlas, the Pass Through Trustee, certain other pass through trustees and certain other persons concurrently herewith are entering into the Note Purchase Agreement, dated as of the date hereof (the "Note Purchase Agreement"), pursuant to which the Pass Through Trustee has agreed to acquire, subject to the terms thereof, from time to time on or prior to the Delivery Period Termination Date (as defined in the Note Purchase Agreement) equipment notes (the "Equipment Notes") issued to finance the acquisition of aircraft by Atlas, as lessee or as owner, utilizing a portion of the proceeds from the sale of the Certificates (the "Net Proceeds"); WHEREAS, the Escrow Agent, the Placement Agents, the Pass Through Trustee and Wilmington Trust Company, as paying agent for the Escrow Agent (in such 3 capacity, together with its successors in such capacity, the "Paying Agent") concurrently herewith are entering into an Escrow and Paying Agent Agreement, dated as of the date hereof (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Escrow Agreement"); WHEREAS, Atlas and the Depositary concurrently herewith are entering into an Indemnity Agreement, dated as of the date hereof (the "Indemnity Agreement"); and WHEREAS, the Placement Agents and the Pass Through Trustee intend that the Net Proceeds be held in escrow by the Escrow Agent on behalf of the Investors pursuant to the Escrow Agreement, subject to withdrawal upon request of and proper certification by the Pass Through Trustee for the purpose of purchasing Equipment Notes, and that pending such withdrawal the Net Proceeds be deposited by the Escrow Agent with the Depositary pursuant to this Agreement, which provides for the Depositary to pay interest for distribution to the Investors and to establish accounts from which the Escrow Agent shall make withdrawals upon request of and proper certification by the Pass Through Trustee. NOW, THEREFORE, in consideration of the obligations contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1.1 Acceptance of Depositary. The Depositary hereby agrees to act as depositary bank as provided herein and in connection therewith to accept all amounts to be delivered to or held by the Depositary pursuant to the terms of this Agreement. The Depositary further agrees to hold, maintain and safeguard the Deposits and the Accounts (as defined below) during the term of this Agreement in accordance with the provisions of this Agreement. The Escrow Agent shall not have any right to withdraw, assign or otherwise transfer moneys held in the Accounts except as permitted by this Agreement. SECTION 1.2 Establishment of Accounts. The Escrow Agent hereby instructs the Depositary, and the Depositary agrees, to establish the separate deposit accounts listed on Schedule I hereto and to establish such additional separate deposit accounts as may be required in connection with the deposits contemplated by Section 2.4 hereof (each, an "Account" and collectively, the "Accounts"), each in the name of the Escrow Agent and all on the terms and conditions set forth in this Agreement. SECTION 2.1 Deposits. The Escrow Agent shall direct the Placement Agents to deposit with the Depositary on the date of this Agreement (the "Deposit Date") in Federal (same day) funds by wire transfer to: ABN AMRO Bank N.V., Chicago Branch, Reference: Atlas 1998-1, and the Depositary shall accept from the Placement Agents, on behalf of the Escrow Agent, the sum of US$115,481,000. Upon acceptance of such sum, the Depositary shall (i) establish each of the deposits specified in Schedule I hereto maturing on the respective dates (each such date, as it may be extended from time to time in accordance with the Indemnity Agreement, through the Delivery Period Termination Date, a "Maturity 2 4 Date") set forth therein (including any deposit made pursuant to Section 2.4 hereof, individually, a "Deposit" and, collectively, the "Deposits") and (ii) credit each Deposit to the related Account as set forth therein. No amount shall be deposited in any Account other than the related Deposit. SECTION 2.2 Interest. The Depositary shall pay interest on each Deposit from and including the date of deposit to but excluding the earlier of (x) the date of withdrawal and (y) the Maturity Date thereof at the rate (the "Public Rate") of 7.68% per annum (computed on the basis of a year of twelve 30-day months) payable to the Paying Agent on behalf of the Escrow Agent semi-annually in arrears on each January 2 and July 2, and on the date of the Final Withdrawal (as defined below), commencing on July 2, 1998 (each, an "Interest Payment Date"), all in accordance with the terms of this Agreement (whether or not any such Deposit is withdrawn on an Interest Payment Date); provided, however, that in the event that no Registration Event (as defined in the Registration Rights Agreement) occurs on or prior to the 180th day after the date of the issuance of the Certificates (the "Registration Date"), the interest rate per annum paid by the Depositary on each Deposit shall be increased by 0.50%, effective from and including August 9, 1998, to but excluding the date on which a Registration Event occurs; and provided, further, that in the event that a Shelf Registration Statement (as defined in the Registration Rights Agreement) ceases to be effective for more than 60 days, whether or not consecutive, during any 12-month period at any time before the earlier of (a) the second anniversary of the date hereof or (b) the sale pursuant to the Shelf Registration Statement of all the Certificates covered thereby, the interest rate per annum paid by the Depositary on each Deposit shall be increased by 0.50% per annum from the 61st day of the applicable 12-month period such Shelf Registration Statement ceases to be effective until such time as the Shelf Registration Statement again becomes effective. Interest accrued on any Deposit that is withdrawn pursuant to a Notice of Purchase Withdrawal (as defined below) shall be paid on the next Interest Payment Date, notwithstanding any intervening Final Withdrawal (as defined below). SECTION 2.3 Withdrawals. (a) On and after the date seven days after the establishment of any Deposit, the Escrow Agent may, by providing at least one Business Day's prior notice of withdrawal to the Depositary in the form of Exhibit A hereto (a "Notice of Purchase Withdrawal"), withdraw not less than the entire balance of such Deposit, except that at any time prior to the actual withdrawal of such Deposit, the Escrow Agent or the Pass Through Trustee may, by notice to the Depositary, cancel such withdrawal (including on the scheduled date therefor), and thereafter such Deposit shall continue to be maintained by the Depositary in accordance with the original terms thereof. Following such withdrawal the balance in the related Account shall be zero and the Depositary shall close such Account. As used herein, "Business Day" means any day, other than a Saturday, Sunday or other day on which commercial banks are authorized or required by law to close in New York, New York, Chicago, Illinois, Denver, Colorado or Wilmington, Delaware. 3 5 (b) The Escrow Agent may, by providing at least 15 days' prior notice of withdrawal to the Depositary in the form of Exhibit B hereto (a "Notice of Prepayment Withdrawal"), withdraw not less than the entire balance of any Deposit together with all accrued and unpaid interest on such Deposit to but excluding the specified date of withdrawal (a "Prepayment Withdrawal"), on such date as shall be specified in such Notice of Prepayment Withdrawal. Following such withdrawal the balance in the related Account shall be zero and the Depositary shall close such Account. Upon any Prepayment Withdrawal, the Depositary shall (i) pay to the Paying Agent an amount equal to excess of the aggregate amount of all Deposits on deposit immediately prior to such Prepayment Withdrawal over the sum of the maximum principal amount of Equipment Notes that may be acquired with funds withdrawn from all Deposits not being withdrawn pursuant to such Notice of Prepayment Withdrawal and (ii) redeposit the remainder, if any, of such Prepayment Withdrawal in accordance with Section 2.4 hereof. (c) The Escrow Agent may, by providing at least 15 days' prior notice of withdrawal to the Depositary in the form of Exhibit C hereto (a "Notice of Final Withdrawal"), withdraw the entire amount of all of the remaining Deposits together with the all accrued and unpaid interest on such Deposits to but excluding the specified date of withdrawal (a "Final Withdrawal"), on such date as shall be specified in such Notice of Final Withdrawal. Following such withdrawal the balance in the related Accounts shall be zero and the Depositary shall close such Accounts. If a Notice of Final Withdrawal has not been given to the Depositary on or before June 29, 1999 (provided, that if a labor strike or work stoppage occurs at The Boeing Company prior to such date, such date shall be extended by adding thereto the number of days that each such labor strike or work stoppage continues in effect but in no event shall any such extension result in a Deposit being held by the Depositary past such Deposit's then scheduled maturity date (subject to extension pursuant to the Indemnity Agreement)) and there are unwithdrawn Deposits on such date, the Depositary shall pay the amount of the Final Withdrawal to the Paying Agent on the Delivery Period Termination Date. (d) If the Depositary receives a duly completed Notice of Purchase Withdrawal, Notice of Prepayment Withdrawal or Notice of Final Withdrawal complying with the provisions of this Agreement, it shall make the payments specified therein in accordance with the provisions of this Agreement. SECTION 2.4 Other Accounts. On the date of withdrawal of any Deposit, the Escrow Agent, or the Pass Through Trustee on behalf of the Escrow Agent, shall be entitled to re-deposit with the Depositary any portion thereof and the Depositary shall accept the same for deposit hereunder; provided, however, that the Depositary shall have no obligation to accept such amounts for deposit if Atlas, at or prior to such time, shall not have complied with the provisions of Section 3(b) of the Indemnity Agreement. Any sums so received for deposit shall be established as a new Deposit and credited to a new Account, all as more fully provided in Section 2.1 hereof, and thereafter the provisions of this Agreement shall apply thereto as fully and with the same force and effect as if such Deposit had been 4 6 established on the Deposit Date except that (i) such Deposit may not be withdrawn prior to the date seven days after the establishment thereof and (ii) such Deposit shall mature on December 30, 1998, as such date may be extended from time to time in accordance with the Indemnity Agreement through the Delivery Period Termination Date. SECTION 2.5 Reset of Maturity Date. If a Registration Event has not occurred on the Registration Date, unless Atlas has complied with Section 3(c) of the Indemnity Agreement, the Maturity Date for the Deposit then held by the Depositary with respect to the final Aircraft to be delivered to Atlas as contemplated by the Note Purchase Agreement shall be reset to the date (the "Reset Date") that the Depositary reasonably determines to be the date on which the sum of (x) interest accrued on the balances of all Deposits hereunder from the date of calculation through the Reset Date at the then current Deposit Rate plus (y) the balance of the Collateral Account as at such date of calculation will be equal to the interest that will have accrued on the Deposits hereunder from such date of calculation through the Reset Date at the Public Rate (assuming all scheduled payments are made on each Interest Payment Date occurring on or prior to the Reset Date and each then remaining Deposit is withdrawn on its then scheduled Maturity Date). The Depositary shall use reasonable efforts to determine the amounts necessary to determine the Reset Date, and such determination shall be conclusive absent manifest error. Any reset of such Maturity Date pursuant to this Section 2.5 shall be without prejudice to Atlas' right to re-extend such Maturity Date by posting additional collateral pursuant to Section 3(a) of the Indemnity Agreement. SECTION 3.1 Termination. This Agreement shall terminate on the later of the date on which (i) all of the Deposits shall have been withdrawn and paid as provided herein without any re-deposit and (ii) all accrued and unpaid interest on the Deposits shall have been paid as provided herein, but in no event prior to the date on which the Depositary shall have performed in full its obligations hereunder. SECTION 3.2 Substitute Depositary. In the event that Atlas is required under the provisions of Section 9 or Section 10 of the Indemnity Agreement to make payments in a material amount to the Depositary, Atlas may elect to terminate the Depositary as a party to this Agreement, the other Deposit Agreements and the Indemnity Agreement; provided that, concurrently with such termination, (i) Atlas shall pay the Depositary all amounts (including, without limitation, amounts, if any, owed under such Section 9 and Section 10) owed to the Depositary pursuant to any such Agreement through such date of termination, (ii) another financial institution satisfactory to Atlas and the Rating Agencies (as defined in the Note Purchase Agreement) shall agree, as of such date, to assume all rights and obligations of the Depositary under all such Agreements to be terminated as of such date, and (iii) all documents and supporting materials necessary to evidence the termination of the Depositary and the substitution of such other financial institution shall have been received as of such date. 5 7 SECTION 4. Payments. All payments (including, without limitation, those payments made in respect of Taxes (as defined and provided for below)) made by the Depositary hereunder shall be paid in United States Dollars and immediately available funds by wire transfer (i) in the case of accrued interest on the Deposits payable under Section 2.2 hereof or any Final Withdrawal, directly to the Paying Agent at Wilmington Trust Company, Wilmington, Delaware, ABA# 03-11-000-92, Account No. 44043-0, Attention: Robert Hines, Reference: Atlas Air, or to such other account as the Paying Agent may direct from time to time in writing to the Depositary and the Escrow Agent and (ii) in the case of any withdrawal of one or more Deposits pursuant to a Notice of Purchase Withdrawal, directly to or as directed by the Pass Through Trustee as specified and in the manner provided in such Notice of Purchase Withdrawal. The Depositary hereby waives any and all rights of set-off, combination of accounts, right of retention or similar right (whether arising under applicable law, contract or otherwise) it may have against the Deposits howsoever arising. All payments on or in respect of each Deposit shall be made free and clear of and without reduction for or on account of any and all taxes, levies or other impositions or charges (collectively, "Taxes"). However, if the Depositary or the Paying Agent (pursuant to Section 2.04 of the Escrow Agreement) shall be required by law to deduct or withhold any Taxes from or in respect of any sum payable hereunder, the Depositary shall (i) make such deductions or withholding, (ii) pay the full amount deducted or withheld (including in respect of such additional amounts) to the competent taxation authority and (iii) if the Taxes required to be deducted or withheld are imposed by the Netherlands or any political subdivision thereof, pay such additional amounts as may be necessary in order that the actual amount received by the designated recipient of such sum under this Agreement or the Escrow Agreement after such deduction or withholding equals the sum it would have received had no such deduction or withholding been required. If the date on which any payment due on any Deposit would otherwise fall on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day, and no additional interest shall accrue in respect of such extension. SECTION 5. Representation and Warranties. The Depositary hereby represents and warrants to Atlas, the Escrow Agent, the Pass Through Trustee and the Paying Agent that: (a) it is a bank duly organized and validly existing in good standing under the laws of the Netherlands and is duly qualified to conduct banking business in the State of Illinois through its Chicago Branch; (b) it has full power, authority and legal right to conduct its business and operations as currently conducted and to enter into and perform its obligations under this Agreement; (c) the execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action on the part of it and do not require any stockholder approval, or approval or consent of any trustee or holder of any 6 8 indebtedness or obligations of it, and such document has been duly executed and delivered by it and constitutes its legal, valid and binding obligations enforceable against it in accordance with the terms hereof; (d) no authorization, consent or approval of or other action by, and no notice to or filing with, any United States federal or state governmental authority or regulatory body is required for the execution, delivery or performance by it of this Agreement; (e) neither the execution, delivery or performance by it of this Agreement, nor compliance with the terms and provisions hereof, conflicts or will conflict with or results or will result in a breach or violation of any of the terms, conditions or provisions of, or will require any consent or approval under, any law, governmental rule or regulation or the charter documents, as amended, or bylaws, as amended, of it or any similar instrument binding on it or any order, writ, injunction or decree of any court or governmental authority against it or by which it or any of its properties is bound or any indenture, mortgage or contract or other agreement or instrument to which it is a party or by which it or any of its properties is bound, or constitutes or will constitute a default thereunder or results or will result in the imposition of any lien upon any of its properties; (f) there are no pending or, to its knowledge, threatened actions, suits, investigations or proceedings (whether or not purportedly on behalf of it) against or affecting it or any of its property before or by any court or administrative agency which, if adversely determined, (i) would adversely affect the ability of it to perform its obligations under this Agreement or (ii) would call into question or challenge the validity of this Agreement or the enforceability hereof in accordance with the terms hereof, nor is the Depositary in default with respect to any order of any court, governmental authority, arbitration board or administrative agency so as to adversely affect its ability to perform its obligations under this Agreement; and (g) the Depositary will make all payments under this Agreement from its own funds and not from funds provided by, or on deposit from, Atlas or any of its subsidiaries. SECTION 6. Transfer. Neither party hereto shall be entitled to assign or otherwise transfer this Agreement (or any interest herein) other than (in the case of the Escrow Agent) to a successor escrow agent under the Escrow Agreement, and any purported assignment in violation thereof shall be void. This Agreement shall be binding upon the parties hereto and their respective successors and (in the case of the Escrow Agent) permitted assigns. Upon the occurrence of the Transfer (as defined below) contemplated by the Assignment and Assumption Agreement (as defined below), the Pass Through Trustee shall (without further act) be deemed to have transferred all of its right, title and interest in and to this Agreement to the trustee of the Successor Trust (as defined below) and, thereafter, the 7 9 trustee of the Successor Trust shall be deemed to be the "Pass Through Trustee" hereunder with the rights of the "Pass Through Trustee" hereunder, and each reference herein to "Atlas Air, Inc. Pass Through Trust 1998-1B-O" shall be deemed to be a reference to "Atlas Air Inc. Pass Through Trust 1998-1B-S". The Escrow Agent and the Depositary hereby acknowledge and consent to the Transfer contemplated by the Assignment and Assumption Agreement. For the purposes of this Section 6, "Transfer" means the transfer contemplated by the Assignment and Assumption Agreement; "Assignment and Assumption Agreement" means the Assignment and Assumption Agreement to be entered into between the Pass Through Trustee and the trustee of the Successor Trust, substantially in the form of Exhibit E to the Pass Through Trust Agreement; and "Successor Trust" means the Atlas Air, Inc. Pass Through Trust 1998-1B-S. SECTION 7. Amendment, Etc. This Agreement may not be amended, waived or otherwise modified except by an instrument in writing signed by the party against whom the amendment, waiver or other modification is sought to be enforced and by the Pass Through Trustee. SECTION 8. Notices. Unless otherwise expressly specified or permitted by the terms hereof, all notices, requests, demands, authorizations, directions, consents, waivers or documents provided or permitted by this Agreement to be made, given, furnished or filed shall be in writing, mailed by certified mail, postage prepaid, or by confirmed telecopy and 8 10 (i) if to the Escrow Agent, addressed to at its office at: FIRST SECURITY BANK, NATIONAL ASSOCIATION 79 South Main Street Salt Lake City, UT 84111 Attention: Corporate Trust Department Telecopier: 801-246-5053 (ii) if to the Depositary, addressed to it at its offices at: ABN AMRO BANK N.V., Chicago Branch 135 South LaSalle Street, Suite 660 Chicago, IL 60674-9135 Attention: Claudia Heldring Telecopier: 312-606-8428 and ABN AMRO BANK N.V., Chicago Branch 181 W. Madison Street Chicago, IL 60602 Attention: Money Markets Desk Telecopier: 312-904-9106 (iii) in each case, with a copy to the Pass Through Trustee, addressed to it at its office at: WILMINGTON TRUST COMPANY One Rodney Square 1100 N. Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Telecopy: 302-651-8882 and to Atlas, addressed to it at its office at: ATLAS AIR, INC. 538 Commons Drive Golden, CO 80401 9 11 Attention: Chief Financial Officer Telecopier: 303-526-5051 Whenever any notice in writing is required to be given by either of the Escrow Agent or the Depositary to the other, such notice shall be deemed given and such requirement satisfied when such notice is received. Any party hereto may change the address to which notices to such party will be sent by giving notice of such change to the other party to this Agreement. On or prior to the execution of this Agreement, the Escrow Agent has delivered to the Depositary a certificate containing specimen signatures of the representatives of the Escrow Agent who are authorized to give notices and instructions with respect to this Agreement. The Depositary may conclusively rely on such certificate until the Depositary receives written notice from the Escrow Agent to the contrary. SECTION 9. Obligations Unconditional. The Depositary hereby acknowledges and agrees that its obligation to repay each Deposit together with interest thereon as provided herein is absolute, irrevocable and unconditional and constitutes a full recourse obligation of the Depositary enforceable against it to the full extent of all of its assets and properties. SECTION 10. Entire Agreement. This Agreement (including all attachments hereto) sets forth all of the promises, covenants, agreements, conditions and understandings between the Depositary and the Escrow Agent with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and undertakings, inducements or conditions, express or implied, oral or written. SECTION 11. Governing Law. This Agreement, and the rights and obligations of the Depositary and the Escrow Agent with respect to the Deposits, shall be governed by, and construed in accordance with, the laws of the State of New York and subject to the provisions of Regulation D of the Board of Governors of the Federal Reserve System (or any successor), as the same may be modified and supplemented and in effect from time to time. SECTION 12. Waiver of Jury Trial Right. EACH OF THE DEPOSITARY AND THE ESCROW AGENT ACKNOWLEDGES AND ACCEPTS THAT IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT SUCH PARTY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY IRREVOCABLY WAIVES, TO THE GREATEST EXTENT PERMISSIBLE BY LAW, ITS RIGHT TO A TRIAL BY JURY. SECTION 13. Counterparts. This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one instrument. 10 12 SECTION 14. Depositary's Obligations. The Depositary and the Escrow Agent understand and agree that in connection with this Agreement, the Depositary is not acting as a fiduciary, agent or other representative of the Escrow Agent, the Pass Through Trustees, the Placement Agents or anyone else, and has no and shall have no obligation to monitor, account for or otherwise concern itself with the source of funds invested hereunder or the application of such funds or of payments made by the Depositary hereunder or in accordance with the terms hereof. 11 13 IN WITNESS WHEREOF, the Escrow Agent and the Depositary have caused this Deposit Agreement to be duly executed as of the day and year first above written. FIRST SECURITY BANK, NATIONAL ASSOCIATION as Escrow Agent By /s/ C. SCOTT NIELSEN ------------------------------- Name: C. Scott Nielsen Title: Vice President ABN AMRO BANK N.V., Chicago Branch as Depositary By /s/ CLAUDIA C. HELDRING ------------------------------- Name: Claudia C. Heldring Title: Vice President By /s/ LUKAS VAN DER HOEF ------------------------------- Name: Lukas van der Hoef Title: Vice President 14 Schedule I Schedule of Deposits (Class B)
Date Deposit Amount Account No. Maturity Date - ---- -------------- ----------- ------------- 2/9/98 7/31/98 2/9/98 8/31/98 2/9/98 10/30/98 2/9/98 11/30/98 2/9/98 12/31/98
[Note: The portion of proceeds of the sale of Class B Certificates deposited into each account will be equal to, in the case of the first four accounts, the maximum principal amount of Equipment Notes that may be purchased with the funds in each such Deposit and, in the case of the final account, any remaining proceeds.] 15 EXHIBIT A NOTICE OF PURCHASE WITHDRAWAL ABN AMRO BANK N.V., Chicago Branch 135 South LaSalle Street, Suite 660 Chicago, IL 60674-9135 Attention: Claudia Heldring Telecopier: 312-606-8428 ABN AMRO BANK N.V., Chicago Branch 181 W. Madison Street Chicago, IL 60602 Attention: Money Markets Desk Telecopier: 312-904-9106 Gentlemen: Reference is made to the Deposit Agreement (Class B) dated as of February 9, 1998 (the "Deposit Agreement") between First Security Bank, N.A., as Escrow Agent, and ABN AMRO Bank N.V., Chicago Branch, as Depositary (the "Depositary"). In accordance with Section 2.3(a) of the Deposit Agreement, the undersigned hereby requests the withdrawal of the entire amount of the Deposit, $_______, Account No. ____________. The undersigned hereby directs the Depositary to pay the proceeds of the Deposit to ________________, Account No. _____, Reference: _________ on _________ __, 199_, upon the telephonic request of a representative reasonably believed by the Depositary to be that of the Pass Through Trustee. FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Escrow Agent By ------------------------------- Name: Title: Dated: _______ __, 199_ 16 EXHIBIT B NOTICE OF PREPAYMENT WITHDRAWAL ABN AMRO BANK N.V., Chicago Branch 135 South LaSalle Street, Suite 660 Chicago, IL 60674-9135 Attention: Claudia Heldring Telecopier: 312-606-8428 ABN AMRO BANK N.V., Chicago Branch 181 W. Madison Street Chicago, IL 60602 Attention: Money Markets Desk Telecopier: 312-904-9106 Gentlemen: Reference is made to the Deposit Agreement (Class B) dated as of February 9, 1998 (the "Deposit Agreement") between First Security Bank, N.A., as Escrow Agent, and ABN AMRO Bank N.V., Chicago Branch, as Depositary (the "Depositary"). In accordance with Section 2.3(B) of the Deposit Agreement, the undersigned hereby requests the withdrawal of the entire amount of the Deposit, $_______, Account No. ____________. The undersigned hereby directs the Depositary (i) to pay to the Paying Agent at Wilmington Trust Company, ABA# 03-11-000-92, Account No. 44043-0, Reference: Atlas Air, out of the proceeds of the Deposit and accrued interest thereon, $________, representing the amount equal to excess of (x) the aggregate amount of all Deposits on deposit immediately prior to such withdrawal over (y) the sum of the maximum principal amount of Equipment Notes that may be acquired with funds withdrawn from all Deposits not being withdrawn pursuant to this Notice of Prepayment Withdrawal and (ii) to redeposit 17 in accordance with Section 2.4 of the Deposit Agreement the remainder, if any, of the amount withdrawn pursuant hereto. FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Escrow Agent By ----------------------------- Name: Title: Dated: _______ __, 199_ 18 EXHIBIT C NOTICE OF FINAL WITHDRAWAL ABN AMRO BANK N.V., Chicago Branch 135 South LaSalle Street, Suite 660 Chicago, IL 60674-9135 Attention: Claudia Heldring Telecopier: 312-606-8428 ABN AMRO BANK N.V., Chicago Branch 181 W. Madison Street Chicago, IL 60602 Attention: Money Markets Desk Telecopier: 312-904-9106 Gentlemen: Reference is made to the Deposit Agreement (Class B) dated as of February 9, 1998 (the "Deposit Agreement") between First Security Bank, N.A., as Escrow Agent, and ABN AMRO Bank N.V., Chicago Branch, as Depositary (the "Depositary"). In accordance with Section 2.3(b) of the Deposit Agreement, the undersigned hereby requests the withdrawal of the entire amount of all Deposits. The undersigned hereby directs the Depositary to pay the proceeds of the Deposits and accrued interest thereon to the Paying Agent at Wilmington Trust Company, ABA# 03-11-000-92, Account No. 44043-0, Reference: Atlas Air. FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Escrow Agent By ----------------------------- Name: Title: Dated: _______ __, 199_ EX-10.98 12 DEPOSIT AGREEMENT CLASS C 1 EXHIBIT 10.98 EXECUTION COPY - -------------------------------------------------------------------------------- DEPOSIT AGREEMENT (Class C) Dated as of February 9, 1998 between FIRST SECURITY BANK, NATIONAL ASSOCIATION as Escrow Agent and ABN AMRO BANK N.V., acting through its Chicago Branch, as Depositary - -------------------------------------------------------------------------------- 2 DEPOSIT AGREEMENT (Class C) dated as of February 9, 1998 (as amended, modified or supplemented from time to time, this "Agreement") between First Security Bank, National Association, a national banking association, as Escrow Agent under the Escrow and Paying Agent Agreement referred to below (in such capacity, together with its successors in such capacity, the "Escrow Agent"), and ABN AMRO Bank N.V., a banking institution organized under the laws of the Netherlands, acting through its Chicago Branch, as depositary bank ("ABN AMRO" and, in its capacity as depositary hereunder, the "Depositary"). W I T N E S S E T H WHEREAS, Atlas Air, Inc. ("Atlas") and Wilmington Trust Company, not in its individual capacity except as otherwise expressly provided therein, but solely as trustee (in such capacity, together with its successors in such capacity, the "Pass Through Trustee") have entered into the Pass Through Trust Agreement dated as of February 9, 1998 (together, as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Pass Through Trust Agreement") relating to Atlas Air, Inc. Pass Through Trust 1998-1C-O pursuant to which the Atlas Air, Inc. Pass Through Trust, Series 1998-1C Certificates referred to therein (the "Certificates") are being issued; WHEREAS, Atlas and Morgan Stanley & Co. Incorporated, BT Alex. Brown Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co. (collectively, the "Placement Agents" and, together with their respective transferees and assigns as registered owners of the Certificates, the "Investors") have entered into a Placement Agreement dated as of January 27, 1998 pursuant to which the Pass Through Trustee will issue and sell the Certificates to the Placement Agents; WHEREAS, the Investors are entitled to the benefits of a Registration Rights Agreement (the "Registration Rights Agreement"), dated as of the date hereof, pursuant to which the Company will file a registration statement with the Securities and Exchange Commission registering the Certificates (or the Exchange Certificates referred to in the Registration Rights Agreement) under the Securities Act of 1933, as amended; WHEREAS, Atlas, the Pass Through Trustee, certain other pass through trustees and certain other persons concurrently herewith are entering into the Note Purchase Agreement, dated as of the date hereof (the "Note Purchase Agreement"), pursuant to which the Pass Through Trustee has agreed to acquire, subject to the terms thereof, from time to time on or prior to the Delivery Period Termination Date (as defined in the Note Purchase Agreement) equipment notes (the "Equipment Notes") issued to finance the acquisition of aircraft by Atlas, as lessee or as owner, utilizing a portion of the proceeds from the sale of the Certificates (the "Net Proceeds"); WHEREAS, the Escrow Agent, the Placement Agents, the Pass Through Trustee and Wilmington Trust Company, as paying agent for the Escrow Agent (in such 3 capacity, together with its successors in such capacity, the "Paying Agent") concurrently herewith are entering into an Escrow and Paying Agent Agreement, dated as of the date hereof (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Escrow Agreement"); WHEREAS, Atlas and the Depositary concurrently herewith are entering into an Indemnity Agreement, dated as of the date hereof (the "Indemnity Agreement"); and WHEREAS, the Placement Agents and the Pass Through Trustee intend that the Net Proceeds be held in escrow by the Escrow Agent on behalf of the Investors pursuant to the Escrow Agreement, subject to withdrawal upon request of and proper certification by the Pass Through Trustee for the purpose of purchasing Equipment Notes, and that pending such withdrawal the Net Proceeds be deposited by the Escrow Agent with the Depositary pursuant to this Agreement, which provides for the Depositary to pay interest for distribution to the Investors and to establish accounts from which the Escrow Agent shall make withdrawals upon request of and proper certification by the Pass Through Trustee. NOW, THEREFORE, in consideration of the obligations contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1.1 Acceptance of Depositary. The Depositary hereby agrees to act as depositary bank as provided herein and in connection therewith to accept all amounts to be delivered to or held by the Depositary pursuant to the terms of this Agreement. The Depositary further agrees to hold, maintain and safeguard the Deposits and the Accounts (as defined below) during the term of this Agreement in accordance with the provisions of this Agreement. The Escrow Agent shall not have any right to withdraw, assign or otherwise transfer moneys held in the Accounts except as permitted by this Agreement. SECTION 1.2 Establishment of Accounts. The Escrow Agent hereby instructs the Depositary, and the Depositary agrees, to establish the separate deposit accounts listed on Schedule I hereto and to establish such additional separate deposit accounts as may be required in connection with the deposits contemplated by Section 2.4 hereof (each, an "Account" and collectively, the "Accounts"), each in the name of the Escrow Agent and all on the terms and conditions set forth in this Agreement. SECTION 2.1 Deposits. The Escrow Agent shall direct the Placement Agents to deposit with the Depositary on the date of this Agreement (the "Deposit Date") in Federal (same day) funds by wire transfer to: ABN AMRO Bank N.V., Chicago Branch, Reference: Atlas 1998-1, and the Depositary shall accept from the Placement Agents, on behalf of the Escrow Agent, the sum of US$123,180,000. Upon acceptance of such sum, the Depositary shall (i) establish each of the deposits specified in Schedule I hereto maturing on the respective dates (each such date, as it may be extended from time to time in accordance with the Indemnity Agreement, through the Delivery Period Termination Date, a "Maturity 2 4 Date") set forth therein (including any deposit made pursuant to Section 2.4 hereof, individually, a "Deposit" and, collectively, the "Deposits") and (ii) credit each Deposit to the related Account as set forth therein. No amount shall be deposited in any Account other than the related Deposit. SECTION 2.2 Interest. The Depositary shall pay interest on each Deposit from and including the date of deposit to but excluding the earlier of (x) the date of withdrawal and (y) the Maturity Date thereof at the rate (the "Public Rate") of 8.01% per annum (computed on the basis of a year of twelve 30-day months) payable to the Paying Agent on behalf of the Escrow Agent semi-annually in arrears on each January 2 and July 2, and on the date of the Final Withdrawal (as defined below), commencing on July 2, 1998 (each, an "Interest Payment Date"), all in accordance with the terms of this Agreement (whether or not any such Deposit is withdrawn on an Interest Payment Date); provided, however, that in the event that no Registration Event (as defined in the Registration Rights Agreement) occurs on or prior to the 180th day after the date of the issuance of the Certificates (the "Registration Date"), the interest rate per annum paid by the Depositary on each Deposit shall be increased by 0.50%, effective from and including August 9, 1998, to but excluding the date on which a Registration Event occurs; and provided, further, that in the event that a Shelf Registration Statement (as defined in the Registration Rights Agreement) ceases to be effective for more than 60 days, whether or not consecutive, during any 12-month period at any time before the earlier of (a) the second anniversary of the date hereof or (b) the sale pursuant to the Shelf Registration Statement of all the Certificates covered thereby, the interest rate per annum paid by the Depositary on each Deposit shall be increased by 0.50% per annum from the 61st day of the applicable 12-month period such Shelf Registration Statement ceases to be effective until such time as the Shelf Registration Statement again becomes effective. Interest accrued on any Deposit that is withdrawn pursuant to a Notice of Purchase Withdrawal (as defined below) shall be paid on the next Interest Payment Date, notwithstanding any intervening Final Withdrawal (as defined below). SECTION 2.3 Withdrawals. (a) On and after the date seven days after the establishment of any Deposit, the Escrow Agent may, by providing at least one Business Day's prior notice of withdrawal to the Depositary in the form of Exhibit A hereto (a "Notice of Purchase Withdrawal"), withdraw not less than the entire balance of such Deposit, except that at any time prior to the actual withdrawal of such Deposit, the Escrow Agent or the Pass Through Trustee may, by notice to the Depositary, cancel such withdrawal (including on the scheduled date therefor), and thereafter such Deposit shall continue to be maintained by the Depositary in accordance with the original terms thereof. Following such withdrawal the balance in the related Account shall be zero and the Depositary shall close such Account. As used herein, "Business Day" means any day, other than a Saturday, Sunday or other day on which commercial banks are authorized or required by law to close in New York, New York, Chicago, Illinois, Denver, Colorado or Wilmington, Delaware. 3 5 (b) The Escrow Agent may, by providing at least 15 days' prior notice of withdrawal to the Depositary in the form of Exhibit B hereto (a "Notice of Prepayment Withdrawal"), withdraw not less than the entire balance of any Deposit together with all accrued and unpaid interest on such Deposit to but excluding the specified date of withdrawal (a "Prepayment Withdrawal"), on such date as shall be specified in such Notice of Prepayment Withdrawal. Following such withdrawal the balance in the related Account shall be zero and the Depositary shall close such Account. Upon any Prepayment Withdrawal, the Depositary shall (i) pay to the Paying Agent an amount equal to excess of the aggregate amount of all Deposits on deposit immediately prior to such Prepayment Withdrawal over the sum of the maximum principal amount of Equipment Notes that may be acquired with funds withdrawn from all Deposits not being withdrawn pursuant to such Notice of Prepayment Withdrawal and (ii) redeposit the remainder, if any, of such Prepayment Withdrawal in accordance with Section 2.4 hereof. (c) The Escrow Agent may, by providing at least 15 days' prior notice of withdrawal to the Depositary in the form of Exhibit C hereto (a "Notice of Final Withdrawal"), withdraw the entire amount of all of the remaining Deposits together with the all accrued and unpaid interest on such Deposits to but excluding the specified date of withdrawal (a "Final Withdrawal"), on such date as shall be specified in such Notice of Final Withdrawal. Following such withdrawal the balance in the related Accounts shall be zero and the Depositary shall close such Accounts. If a Notice of Final Withdrawal has not been given to the Depositary on or before June 29, 1999 (provided, that if a labor strike or work stoppage occurs at The Boeing Company prior to such date, such date shall be extended by adding thereto the number of days that each such labor strike or work stoppage continues in effect but in no event shall any such extension result in a Deposity being held by the Depositary past such Deposit's then scheduled maturity date (subject to extension pursuant to the Indemnity Agreement)) and there are unwithdrawn Deposits on such date, the Depositary shall pay the amount of the Final Withdrawal to the Paying Agent on the Delivery Period Termination Date. (d) If the Depositary receives a duly completed Notice of Purchase Withdrawal, Notice of Prepayment Withdrawal or Notice of Final Withdrawal complying with the provisions of this Agreement, it shall make the payments specified therein in accordance with the provisions of this Agreement. SECTION 2.4 Other Accounts. On the date of withdrawal of any Deposit, the Escrow Agent, or the Pass Through Trustee on behalf of the Escrow Agent, shall be entitled to re-deposit with the Depositary any portion thereof and the Depositary shall accept the same for deposit hereunder; provided, however, that the Depositary shall have no obligation to accept such amounts for deposit if Atlas, at or prior to such time, shall not have complied with the provisions of Section 3(b) of the Indemnity Agreement. Any sums so received for deposit shall be established as a new Deposit and credited to a new Account, all as more fully provided in Section 2.1 hereof, and thereafter the provisions of this Agreement shall apply thereto as fully and with the same force and effect as if such Deposit had been 4 6 established on the Deposit Date except that (i) such Deposit may not be withdrawn prior to the date seven days after the establishment thereof and (ii) such Deposit shall mature on December 30, 1998, as such date may be extended from time to time in accordance with the Indemnity Agreement through the Delivery Period Termination Date. SECTION 2.5 Reset of Maturity Date. If a Registration Event has not occurred on the Registration Date, unless Atlas has complied with Section 3(c) of the Indemnity Agreement, the Maturity Date for the Deposit then held by the Depositary with respect to the final Aircraft to be delivered to Atlas as contemplated by the Note Purchase Agreement shall be reset to the date (the "Reset Date") that the Depositary reasonably determines to be the date on which the sum of (x) interest accrued on the balances of all Deposits hereunder from the date of calculation through the Reset Date at the then current Deposit Rate plus (y) the balance of the Collateral Account as at such date of calculation will be equal to the interest that will have accrued on the Deposits hereunder from such date of calculation through the Reset Date at the Public Rate (assuming all scheduled payments are made on each Interest Payment Date occurring on or prior to the Reset Date and each then remaining Deposit is withdrawn on its then scheduled Maturity Date). The Depositary shall use reasonable efforts to determine the amounts necessary to determine the Reset Date, and such determination shall be conclusive absent manifest error. Any reset of such Maturity Date pursuant to this Section 2.5 shall be without prejudice to Atlas' right to re-extend such Maturity Date by posting additional collateral pursuant to Section 3(a) of the Indemnity Agreement. SECTION 3.1 Termination. This Agreement shall terminate on the later of the date on which (i) all of the Deposits shall have been withdrawn and paid as provided herein without any re-deposit and (ii) all accrued and unpaid interest on the Deposits shall have been paid as provided herein, but in no event prior to the date on which the Depositary shall have performed in full its obligations hereunder. SECTION 3.2 Substitute Depositary. In the event that Atlas is required under the provisions of Section 9 or Section 10 of the Indemnity Agreement to make payments in a material amount to the Depositary, Atlas may elect to terminate the Depositary as a party to this Agreement, the other Deposit Agreements and the Indemnity Agreement; provided that, concurrently with such termination, (i) Atlas shall pay the Depositary all amounts (including, without limitation, amounts, if any, owed under such Section 9 and Section 10) owed to the Depositary pursuant to any such Agreement through such date of termination, (ii) another financial institution satisfactory to Atlas and the Rating Agencies (as defined in the Note Purchase Agreement) shall agree, as of such date, to assume all rights and obligations of the Depositary under all such Agreements to be terminated as of such date, and (iii) all documents and supporting materials necessary to evidence the termination of the Depositary and the substitution of such other financial institution shall have been received as of such date. 5 7 SECTION 4. Payments. All payments (including, without limitation, those payments made in respect of Taxes (as defined and provided for below)) made by the Depositary hereunder shall be paid in United States Dollars and immediately available funds by wire transfer (i) in the case of accrued interest on the Deposits payable under Section 2.2 hereof or any Final Withdrawal, directly to the Paying Agent at Wilmington Trust Company, Wilmington, Delaware, ABA# 03-11-000-92, Account No. 44043-0, Attention: Robert Hines, Reference: Atlas Air, or to such other account as the Paying Agent may direct from time to time in writing to the Depositary and the Escrow Agent and (ii) in the case of any withdrawal of one or more Deposits pursuant to a Notice of Purchase Withdrawal, directly to or as directed by the Pass Through Trustee as specified and in the manner provided in such Notice of Purchase Withdrawal. The Depositary hereby waives any and all rights of set-off, combination of accounts, right of retention or similar right (whether arising under applicable law, contract or otherwise) it may have against the Deposits howsoever arising. All payments on or in respect of each Deposit shall be made free and clear of and without reduction for or on account of any and all taxes, levies or other impositions or charges (collectively, "Taxes"). However, if the Depositary or the Paying Agent (pursuant to Section 2.04 of the Escrow Agreement) shall be required by law to deduct or withhold any Taxes from or in respect of any sum payable hereunder, the Depositary shall (i) make such deductions or withholding, (ii) pay the full amount deducted or withheld (including in respect of such additional amounts) to the competent taxation authority and (iii) if the Taxes required to be deducted or withheld are imposed by the Netherlands or any political subdivision thereof, pay such additional amounts as may be necessary in order that the actual amount received by the designated recipient of such sum under this Agreement or the Escrow Agreement after such deduction or withholding equals the sum it would have received had no such deduction or withholding been required. If the date on which any payment due on any Deposit would otherwise fall on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day, and no additional interest shall accrue in respect of such extension. SECTION 5. Representation and Warranties. The Depositary hereby represents and warrants to Atlas, the Escrow Agent, the Pass Through Trustee and the Paying Agent that: (a) it is a bank duly organized and validly existing in good standing under the laws of the Netherlands and is duly qualified to conduct banking business in the State of Illinois through its Chicago Branch; (b) it has full power, authority and legal right to conduct its business and operations as currently conducted and to enter into and perform its obligations under this Agreement; (c) the execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action on the part of it and do not require any stockholder approval, or approval or consent of any trustee or holder of any 6 8 indebtedness or obligations of it, and such document has been duly executed and delivered by it and constitutes its legal, valid and binding obligations enforceable against it in accordance with the terms hereof; (d) no authorization, consent or approval of or other action by, and no notice to or filing with, any United States federal or state governmental authority or regulatory body is required for the execution, delivery or performance by it of this Agreement; (e) neither the execution, delivery or performance by it of this Agreement, nor compliance with the terms and provisions hereof, conflicts or will conflict with or results or will result in a breach or violation of any of the terms, conditions or provisions of, or will require any consent or approval under, any law, governmental rule or regulation or the charter documents, as amended, or bylaws, as amended, of it or any similar instrument binding on it or any order, writ, injunction or decree of any court or governmental authority against it or by which it or any of its properties is bound or any indenture, mortgage or contract or other agreement or instrument to which it is a party or by which it or any of its properties is bound, or constitutes or will constitute a default thereunder or results or will result in the imposition of any lien upon any of its properties; (f) there are no pending or, to its knowledge, threatened actions, suits, investigations or proceedings (whether or not purportedly on behalf of it) against or affecting it or any of its property before or by any court or administrative agency which, if adversely determined, (i) would adversely affect the ability of it to perform its obligations under this Agreement or (ii) would call into question or challenge the validity of this Agreement or the enforceability hereof in accordance with the terms hereof, nor is the Depositary in default with respect to any order of any court, governmental authority, arbitration board or administrative agency so as to adversely affect its ability to perform its obligations under this Agreement; and (g) the Depositary will make all payments under this Agreement from its own funds and not from funds provided by, or on deposit from, Atlas or any of its subsidiaries. SECTION 6. Transfer. Neither party hereto shall be entitled to assign or otherwise transfer this Agreement (or any interest herein) other than (in the case of the Escrow Agent) to a successor escrow agent under the Escrow Agreement, and any purported assignment in violation thereof shall be void. This Agreement shall be binding upon the parties hereto and their respective successors and (in the case of the Escrow Agent) permitted assigns. Upon the occurrence of the Transfer (as defined below) contemplated by the Assignment and Assumption Agreement (as defined below), the Pass Through Trustee shall (without further act) be deemed to have transferred all of its right, title and interest in and to this Agreement to the trustee of the Successor Trust (as defined below) and, thereafter, the 7 9 trustee of the Successor Trust shall be deemed to be the "Pass Through Trustee" hereunder with the rights of the "Pass Through Trustee" hereunder, and each reference herein to "Atlas Air, Inc. Pass Through Trust 1998-1C-O" shall be deemed to be a reference to "Atlas Air Inc. Pass Through Trust 1998-1C-S". The Escrow Agent and the Depositary hereby acknowledge and consent to the Transfer contemplated by the Assignment and Assumption Agreement. For the purposes of this Section 6, "Transfer" means the transfer contemplated by the Assignment and Assumption Agreement; "Assignment and Assumption Agreement" means the Assignment and Assumption Agreement to be entered into between the Pass Through Trustee and the trustee of the Successor Trust, substantially in the form of Exhibit E to the Pass Through Trust Agreement; and "Successor Trust" means the Atlas Air, Inc. Pass Through Trust 1998-1C-S. SECTION 7. Amendment, Etc. This Agreement may not be amended, waived or otherwise modified except by an instrument in writing signed by the party against whom the amendment, waiver or other modification is sought to be enforced and by the Pass Through Trustee. SECTION 8. Notices. Unless otherwise expressly specified or permitted by the terms hereof, all notices, requests, demands, authorizations, directions, consents, waivers or documents provided or permitted by this Agreement to be made, given, furnished or filed shall be in writing, mailed by certified mail, postage prepaid, or by confirmed telecopy and 8 10 (i) if to the Escrow Agent, addressed to at its office at: FIRST SECURITY BANK, NATIONAL ASSOCIATION 79 South Main Street Salt Lake City, UT 84111 Attention: Corporate Trust Department Telecopier: 801-246-5053 (ii) if to the Depositary, addressed to it at its offices at: ABN AMRO BANK N.V., Chicago Branch 135 South LaSalle Street, Suite 660 Chicago, IL 60674-9135 Attention: Claudia Heldring Telecopier: 312-606-8428 and ABN AMRO BANK N.V., Chicago Branch 181 W. Madison Street Chicago, IL 60602 Attention: Money Markets Desk Telecopier: 312-904-9106 (iii) in each case, with a copy to the Pass Through Trustee, addressed to it at its office at: WILMINGTON TRUST COMPANY One Rodney Square 1100 N. Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Telecopy: 302-651-8882 and to Atlas, addressed to it at its office at: ATLAS AIR, INC. 538 Commons Drive Golden, CO 80401 9 11 Attention: Chief Financial Officer Telecopier: 303-526-5051 Whenever any notice in writing is required to be given by either of the Escrow Agent or the Depositary to the other, such notice shall be deemed given and such requirement satisfied when such notice is received. Any party hereto may change the address to which notices to such party will be sent by giving notice of such change to the other party to this Agreement. On or prior to the execution of this Agreement, the Escrow Agent has delivered to the Depositary a certificate containing specimen signatures of the representatives of the Escrow Agent who are authorized to give notices and instructions with respect to this Agreement. The Depositary may conclusively rely on such certificate until the Depositary receives written notice from the Escrow Agent to the contrary. SECTION 9. Obligations Unconditional. The Depositary hereby acknowledges and agrees that its obligation to repay each Deposit together with interest thereon as provided herein is absolute, irrevocable and unconditional and constitutes a full recourse obligation of the Depositary enforceable against it to the full extent of all of its assets and properties. SECTION 10. Entire Agreement. This Agreement (including all attachments hereto) sets forth all of the promises, covenants, agreements, conditions and understandings between the Depositary and the Escrow Agent with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and undertakings, inducements or conditions, express or implied, oral or written. SECTION 11. Governing Law. This Agreement, and the rights and obligations of the Depositary and the Escrow Agent with respect to the Deposits, shall be governed by, and construed in accordance with, the laws of the State of New York and subject to the provisions of Regulation D of the Board of Governors of the Federal Reserve System (or any successor), as the same may be modified and supplemented and in effect from time to time. SECTION 12. Waiver of Jury Trial Right. EACH OF THE DEPOSITARY AND THE ESCROW AGENT ACKNOWLEDGES AND ACCEPTS THAT IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT SUCH PARTY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY IRREVOCABLY WAIVES, TO THE GREATEST EXTENT PERMISSIBLE BY LAW, ITS RIGHT TO A TRIAL BY JURY. SECTION 13. Counterparts. This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one instrument. 10 12 SECTION 14. Depositary's Obligations. The Depositary and the Escrow Agent understand and agree that in connection with this Agreement, the Depositary is not acting as a fiduciary, agent or other representative of the Escrow Agent, the Pass Through Trustees, the Placement Agents or anyone else, and has no and shall have no obligation to monitor, account for or otherwise concern itself with the source of funds invested hereunder or the application of such funds or of payments made by the Depositary hereunder or in accordance with the terms hereof. 11 13 IN WITNESS WHEREOF, the Escrow Agent and the Depositary have caused this Deposit Agreement to be duly executed as of the day and year first above written. FIRST SECURITY BANK, NATIONAL ASSOCIATION as Escrow Agent By /s/ C. SCOTT NIELSEN ------------------------------ Name: C. Scott Nielsen Title: Vice President ABN AMRO BANK N.V., Chicago Branch as Depositary By /s/ CLAUDIA C. HELDRING ------------------------------ Name: Claudia C. Heldring Title: Vice President By /s/ LUKAS VAN DER HOEF ------------------------------ Name: Lukas van der Hoef Title: Vice President 14 Schedule I Schedule of Deposits (Class C)
Date Deposit Amount Account No. Maturity Date - ---- -------------- ----------- ------------- 2/9/98 7/31/98 2/9/98 8/31/98 2/9/98 10/30/98 2/9/98 11/30/98 2/9/98 12/31/98
[Note: The portion of proceeds of the sale of Class C Certificates deposited into each account will be equal to, in the case of the first four accounts, the maximum principal amount of Equipment Notes that may be purchased with the funds in each such Deposit and, in the case of the final account, any remaining proceeds.] 15 EXHIBIT A NOTICE OF PURCHASE WITHDRAWAL ABN AMRO BANK N.V., Chicago Branch 135 South LaSalle Street, Suite 660 Chicago, IL 60674-9135 Attention: Claudia Heldring Telecopier: 312-606-8428 ABN AMRO BANK N.V., Chicago Branch 181 W. Madison Street Chicago, IL 60602 Attention: Money Markets Desk Telecopier: 312-904-9106 Gentlemen: Reference is made to the Deposit Agreement (Class C) dated as of February 9, 1998 (the "Deposit Agreement") between First Security Bank, N.A., as Escrow Agent, and ABN AMRO Bank N.V., Chicago Branch, as Depositary (the "Depositary"). In accordance with Section 2.3(a) of the Deposit Agreement, the undersigned hereby requests the withdrawal of the entire amount of the Deposit, $_______, Account No. ____________. The undersigned hereby directs the Depositary to pay the proceeds of the Deposit to ________________, Account No. _____, Reference: _________ on _________ __, 199_, upon the telephonic request of a representative reasonably believed by the Depositary to be that of the Pass Through Trustee. FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Escrow Agent By ------------------------------- Name: Title: Dated: _______ __, 199_ 16 EXHIBIT B NOTICE OF PREPAYMENT WITHDRAWAL ABN AMRO BANK N.V., Chicago Branch 135 South LaSalle Street, Suite 660 Chicago, IL 60674-9135 Attention: Claudia Heldring Telecopier: 312-606-8428 ABN AMRO BANK N.V., Chicago Branch 181 W. Madison Street Chicago, IL 60602 Attention: Money Markets Desk Telecopier: 312-904-9106 Gentlemen: Reference is made to the Deposit Agreement (Class C) dated as of February 9, 1998 (the "Deposit Agreement") between First Security Bank, N.A., as Escrow Agent, and ABN AMRO Bank N.V., Chicago Branch, as Depositary (the "Depositary"). In accordance with Section 2.3(B) of the Deposit Agreement, the undersigned hereby requests the withdrawal of the entire amount of the Deposit, $_______, Account No. ____________. The undersigned hereby directs the Depositary (i) to pay to the Paying Agent at Wilmington Trust Company, ABA# 03-11-000-92, Account No. 44043-0, Reference: Atlas Air, out of the proceeds of the Deposit and accrued interest thereon, $________, representing the amount equal to excess of (x) the aggregate amount of all Deposits on deposit immediately prior to such withdrawal over (y) the sum of the maximum principal amount of Equipment Notes that may be acquired with funds withdrawn from all Deposits not being withdrawn pursuant to this Notice of Prepayment Withdrawal and (ii) to redeposit 17 in accordance with Section 2.4 of the Deposit Agreement the remainder, if any, of the amount withdrawn pursuant hereto. FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Escrow Agent By ---------------------------- Name: Title: Dated: _______ __, 199_ 18 EXHIBIT C NOTICE OF FINAL WITHDRAWAL ABN AMRO BANK N.V., Chicago Branch 135 South LaSalle Street, Suite 660 Chicago, IL 60674-9135 Attention: Claudia Heldring Telecopier: 312-606-8428 ABN AMRO BANK N.V., Chicago Branch 181 W. Madison Street Chicago, IL 60602 Attention: Money Markets Desk Telecopier: 312-904-9106 Gentlemen: Reference is made to the Deposit Agreement (Class C) dated as of February 9, 1998 (the "Deposit Agreement") between First Security Bank, N.A., as Escrow Agent, and ABN AMRO Bank N.V., Chicago Branch, as Depositary (the "Depositary"). In accordance with Section 2.3(b) of the Deposit Agreement, the undersigned hereby requests the withdrawal of the entire amount of all Deposits. The undersigned hereby directs the Depositary to pay the proceeds of the Deposits and accrued interest thereon to the Paying Agent at Wilmington Trust Company, ABA# 03-11-000-92, Account No. 44043-0, Reference: Atlas Air. FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Escrow Agent By --------------------------- Name: Title: Dated: _______ __, 199_ EX-10.99 13 INDEMNITY AGREEMENT 1 EXHIBIT 10.99 EXECUTION COPY INDEMNITY AGREEMENT Dated as of February 9, 1998 between ABN AMRO BANK N.V., Chicago Branch as Depositary and ATLAS AIR, INC. 2 TABLE OF CONTENTS
Page ---- SECTION 1. Indemnity Payments . . . . . . . . . . . . . . . . . . . . 2 SECTION 2. Collateral Account and Investments . . . . . . . . . . . . 2 SECTION 3. Increases in Collateral Account . . . . . . . . . . . . . 4 SECTION 4. Breakage Account; Breakage Costs . . . . . . . . . . . . . 5 SECTION 5. Overdue Amounts . . . . . . . . . . . . . . . . . . . . . 7 SECTION 6. Representations and Warranties . . . . . . . . . . . . . . 7 SECTION 7. Conditions Precedent . . . . . . . . . . . . . . . . . . . 9 SECTION 8. No Set-Off . . . . . . . . . . . . . . . . . . . . . . . 10 SECTION 9. Increased Costs . . . . . . . . . . . . . . . . . . . . . 10 SECTION 10. Capital Adequacy . . . . . . . . . . . . . . . . . . . . . 11 SECTION 11. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 SECTION 12. Expenses; Indemnity . . . . . . . . . . . . . . . . . . . 12 SECTION 13. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . 12 SECTION 14. Amendment, Etc. . . . . . . . . . . . . . . . . . . . . . 12 SECTION 15. Notices . . . . . . . . . . . . . . . . . . . . . . . . . 12 SECTION 16. Entire Agreement . . . . . . . . . . . . . . . . . . . . . 13 SECTION 17. Governing Law . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 18. Waiver of Jury Trial Right . . . . . . . . . . . . . . . . 13 SECTION 19. Counterparts . . . . . . . . . . . . . . . . . . . . . . . 14
3 Schedule I Deposit Agreements; Deposit Interest Rate; Initial Collateral Deposit Schedule II Aircraft Annex A Definitions Exhibit A Form of Officer's Certificate Exhibit B-1 Form of Opinion of Counsel for Atlas Exhibit B-2 Form of Opinion of In-House Legal Counsel of Atlas Exhibit C-1 Form of Opinion of U.S. Counsel for ABN AMRO Exhibit C-2 Form of Opinion of Netherlands Counsel for ABN AMRO ii 4 INDEMNITY AGREEMENT INDEMNITY AGREEMENT dated as of February 9, 1998 (as amended, modified or supplemented from time to time, this "Agreement") between ABN AMRO BANK N.V., a banking institution organized under the laws of the Netherlands, acting through its Chicago Branch ("ABN AMRO", and in its capacity as depositary bank under the Deposit Agreements referred to below (together with its successors and assigns in such capacity), the "Depositary"), and ATLAS AIR, INC., a Delaware corporation (together with its successors and assigns, "Atlas"). W I T N E S S E T H WHEREAS, in connection with the financing by Atlas of the Aircraft set forth on Schedule I hereto, First Security Bank, National Association, as escrow agent (in such capacity together with its successors in such capacity, the "Escrow Agent"), and the Depositary are entering into the Deposit Agreements set forth on Schedule II hereto (as amended, modified or supplemented from time to time in accordance with the terms thereof and with the consent of Atlas, the "Deposit Agreements") pursuant to each of which, among other things, (i) the Depositary will establish accounts into and from which the Escrow Agent shall make deposits, withdrawals and re-deposits and (ii) the Depositary will pay the Escrow Agent interest at the Coupon Rate on the amounts on deposit in each such account (such amounts, the "Deposits"); WHEREAS, on the date hereof, the Escrow Agent shall deposit (i) $300,254,000 with the Depositary under the Class A Deposit Agreement (the "Initial Class A Deposit Amount"), (ii) $115,481,000 with the Depositary under the Class B Deposit Agreement (the "Initial Class B Deposit Amount") and (iii) $123,180,000 with the Depositary under the Class C Deposit Agreement (the "Initial Class C Deposit Amount" and, together with the Initial Class A Deposit Amount and the Initial Class B Deposit Amount, the "Initial Deposit Amounts"); and WHEREAS, it is a condition precedent to the obligation of the Depositary to enter into the Deposit Agreements that Atlas enter into this Indemnity Agreement; NOW, THEREFORE, in consideration of the Depositary entering into the Deposit Agreements and the mutual agreements herein contained and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows (capitalized terms not defined herein shall have the meanings set forth in Annex A hereto): 5 2 SECTION 1. Indemnity Payments. (a) On each Interest Payment Date, Atlas shall pay to ABN AMRO the amount, if any, by which (x) the sum of all payments to be made by the Depositary to the Escrow Agent pursuant to the Deposit Agreements on such Interest Payment Date (including any amounts resulting from an increase in the applicable Coupon Rate in accordance with Section 2.2 of the Deposit Agreements) exceeds (y) the sum of interest which has accrued on each Deposit at the rate set forth on Schedule II hereto under the heading "Deposit Interest Rate" (the "Deposit Interest Rate") from and including the Interest Payment Date immediately preceding such Interest Payment Date (or, in the case of the initial Interest Payment Date, from and including the date of this Agreement) to but excluding such Interest Payment Date. (b) In the event that any new Deposit is established pursuant to Section 2.4 of the Deposit Agreement (a "New Deposit"), on each Interest Payment Date subsequent to the date of establishment of such New Deposit, Atlas shall pay to ABN AMRO the amount, if any, by which (x) the payment to be made by the Depositary to the Escrow Agent with respect to such New Deposit pursuant to the relevant Deposit Agreement (including any amounts resulting from an increase in the applicable Coupon Rate in accordance with Section 2.2 of the Deposit Agreements) exceeds (y) the interest which has accrued on such New Deposit at the rate established by ABN AMRO as the deposit interest rate with respect thereto (the "New Deposit Interest Rate") from and including the Interest Payment Date immediately preceding such Interest Payment Date (or, in the case of the first Interest Payment Date following the date of establishment of such New Deposit, from and including such date of establishment) to but excluding such Interest Payment Date. SECTION 2. Collateral Account and Investments. (a) Collateral Account. There is hereby established with ABN AMRO a collateral account (the "Collateral Account") in the name and under the control of ABN AMRO into which Atlas shall deposit cash from time to time in accordance with the provisions of Section 2(b) and Section 3 hereof. The balance from time to time in the Collateral Account shall be subject to withdrawal only as provided herein. (b) Initial Collateral Account Deposit. On the date hereof, Atlas shall deposit into the Collateral Account the amount set forth on Schedule II hereto under the heading "Initial Collateral Deposit", representing the aggregate of (1) the amount by which (x) the sum of all payments to be made by the Depositary to the Escrow Agent pursuant to the Deposit Agreements exceeds (y) the sum of interest accruing at the Deposit Interest Rate on each Deposit from and including the date of establishment thereof to but excluding the Maturity Date thereof and (2) the Overdue Amount, reasonably estimated by ABN AMRO, 6 3 that would accrue and become payable by Atlas to ABN AMRO pursuant to Section 5(b) of this Agreement as a result of the occurrence of the events described in such Section. (c) Investment of Balance in Collateral Account. Amounts on deposit in the Collateral Account shall be invested from time to time in Permitted Investments at the direction of Atlas; provided, that if Atlas shall fail to provide instructions with respect to the investment of any amounts in the Collateral Account not then invested in Permitted Investments at or before 12:00 noon Chicago time on any day such amounts are to be invested, ABN AMRO shall invest such amounts in Permitted Investments with a duration of one day. Such Permitted Investments shall be held in the name and be under the control of ABN AMRO. (d) Pledge. As collateral security for the prompt payment in full when due of Atlas' obligations under this Agreement (but with respect to Atlas' obligation to pay Breakage Obligations (as defined below) pursuant to Section 4 hereof, only to the extent that the amounts on deposit in the Breakage Account (as defined below) and pledged in accordance with Section 4(c) hereof are insufficient to cover amounts due and payable pursuant to such Section 4) (the "Secured Obligations"), Atlas hereby pledges and grants to ABN AMRO a security interest in all of Atlas' right, title and interest in and to the Collateral Account, the amounts on deposit therein, the funds therein, the balance thereof and all proceeds of the foregoing (collectively, the "Collateral"). If at any time Atlas shall fail to pay any Secured Obligation when due, ABN AMRO may (in its sole discretion) (i) liquidate any investments made in respect of amounts deposited in the Collateral Account and (ii) apply or cause to be applied the balance from time to time outstanding to the credit of the Collateral Account to the payment of such Secured Obligation. In addition, with respect to the Collateral, ABN AMRO shall be entitled to all rights and remedies available to a secured party under the Uniform Commercial Code as in effect in any applicable jurisdiction and such additional rights and remedies to which a secured party is entitled under the laws in effect in any jurisdiction where any rights and remedies hereunder may be asserted. Atlas hereby appoints ABN AMRO as its attorney-in-fact, with full power of substitution, so that, if Atlas shall fail to pay any Secured Obligation or Breakage Obligation when due, ABN AMRO may take such action and execute such agreements, instruments and documents with respect to the Collateral, in the name of Atlas, as ABN AMRO may deem necessary or desirable for ABN AMRO to exercise its rights and remedies hereunder, or to enforce Atlas' obligations hereunder or to perfect ABN AMRO's security interest granted hereunder, which appointment is coupled with an interest and is irrevovable. The proceeds of any sale of Collateral or any setoff of the Collateral against the Secured Obligations and Breakage Obligations shall be applied (i) first, to all reasonable expenses (including, without limitation, fees and expenses of legal counsel) or taxes imposed or incurred in connection with the custody, care, sale or collection, or realization upon, any of the Collateral or the preservation or enforcement of any rights of ABN AMRO 7 4 hereunder, and (ii) second, to the payment of the Secured Obligations. To the extent any such application of the proceeds of the Collateral is insufficient to cover all such expenses and Secured Obligations and Breakage Obligations, Atlas shall be liable for such insufficiency. (e) On each Interest Payment Date, if at the time the Depositary has made the payments of interest scheduled to be made on such Interest Payment Date pursuant to the Deposit Agreements, Atlas has not otherwise paid to ABN AMRO all sums due and payable on such Interest Payment date pursuant to Section 1(a) (and, if any New Deposit has been established, Section 1(b)) hereof, ABN AMRO shall withdraw and apply to Atlas' obligations to make payments under such Sections an amount in the Collateral Account equal to the aggregate amount then due and payable pursuant thereto. (f) Atlas may, from time to time and so long as it is not in default of any of its obligations pursuant hereto, request that ABN AMRO withdraw from the Collateral Account and release to Atlas any unreleased Investment Earnings therein. Within five Business Days of delivery of such request, ABN AMRO shall pay such amounts to Atlas in immediately available funds. (g) Upon the later of: (i) the later of (x) the date on which all of the Deposits shall have been withdrawn and paid (or shall be required to be withdrawn and paid) as provided in the Deposit Agreements without any redeposit and (y) the date on which all accrued and unpaid interest on the Deposits shall have been paid (or shall have become due and payable) as provided in the Deposit Agreement (the later of clause (x) and (y) being referred to as the "Deposit Agreement Termination Date") and (ii) the payment in full of all Secured Obligations due and payable on or prior to the Deposit Agreement Termination Date (the "Termination Date"), ABN AMRO shall pay all amounts in the Collateral Account, together with any unreleased Investment Earnings thereon, to Atlas as promptly as is practicable and in immediately available funds. 8 5 SECTION 3. Increases in Collateral Account. (a) Delayed Delivery; Extension of Maturity Dates. (i) With respect to any particular Aircraft (or Substitute Aircraft in respect thereof) that will not be delivered and in respect of which Equipment Notes will not be issued pursuant to the Note Purchase Agreement on or prior to the last Business Day of such Aircraft's Scheduled Delivery Month, Atlas may extend the Maturity Date of any Deposits maturing within such Scheduled Delivery Month by delivering to ABN AMRO at least 15 days prior to such Maturity Date a notice (an "Extension Notice") specifying a date prior to the Delivery Period Termination Date to which such Maturity Date is to be extended (such date, the "Rescheduled Maturity Date"). Upon receipt of the Extension Notice, ABN AMRO shall establish, and promptly deliver to Atlas notice of, the deposit interest rate (the "Extension Rate") that shall apply to such Deposits for the period from and including their original Maturity Date to but excluding their Rescheduled Maturity Date (such period, the "Extension Period"). Upon the original Maturity Date of any Deposit with respect to which ABN AMRO has received an Extension Notice, the maturity of such Deposit shall be deemed extended to the Rescheduled Maturity Date without the need for any action on the part of the Escrow Agent or the Depositary; provided, however, that Atlas may exercise no such right of extension, and such Maturity Dates shall not be extended in accordance with this Section 3(a)(i), if Atlas shall not have deposited into the Collateral Account on or prior to the relevant original Maturity Date an amount (such amount, the "Delay Increase Amount") equal to the excess, if any, of (x) the aggregate interest accruing on such Deposits pursuant to the Deposit Agreements during the Extension Period over (y) the aggregate interest accruing on such Deposits at the Extension Rate during the Extension Period. (ii) Nothing in Section 3(a)(i) above shall be interpreted to prevent Atlas from further extending any Maturity Dates previously extended in accordance therewith; provided, however, that in no event shall Atlas be able to extend any Maturity Date beyond the Delivery Period Termination Date. In the event of any such further extensions, any references in such Section to a "Maturity Date" or "original Maturity Date" shall be deemed to refer to the most recently established Rescheduled Maturity Date with respect to the relevant Deposits and any references in such Section to a "Rescheduled Maturity Date" shall be deemed to refer to the date of maturity of such Deposits as to be further extended. 9 6 (b) Re-deposits. In the event that any New Deposit is established, Atlas shall, on the date of the establishment thereof, deposit into the Collateral Account the amount by which (x) the sum of all payments to be made by the Depositary to the Escrow Agent with respect to such new Deposit pursuant to the relevant Deposit Agreement exceeds (y) the sum of interest accruing on such new Deposit at the New Deposit Interest Rate with respect thereto from and including the date of establishment of such New Deposit to but excluding the Maturity Date thereof. (c) Interest Step-up. If no Registration Event has occurred 30 days prior to the Registration Date, or in the event of any increase in the Coupon Rate of any Deposit pursuant to Section 2.2 of the Deposit Agreements, Atlas shall, on the applicable date, deposit into the Collateral Account an amount equal to the aggregate additional interest that would accrue on all Deposits then extant as a result of such increase from and including the date of such increase to but excluding the Delivery Period Termination Date. Upon the cessation of such increase, ABN AMRO shall pay to Atlas as promptly as is practicable and in immediately available funds an amount equal to the excess, if any, of (x) the amount deposited by Atlas into the Collateral Account pursuant to this Section 3(c) over (y) the aggregate additional interest that actually accrued on the Deposits from and including the date of such increase to but excluding the date of the cessation thereof, together with any unreleased Investment Earnings thereon. (d) Breakage Gross-Up. In the event that ABN AMRO exercises its rights under Section 2(d) hereof with respect to any amounts due and payable pursuant to Section 4 hereof, Atlas shall upon demand by ABN AMRO deposit into the Collateral Account an amount equal to the amount withdrawn from the Collateral Account in accordance with such Section 2(d) within 5 days of such demand or, if an Interest Payment shall occur before the lapse of such 5-day period, on or before such Interest Payment Date. SECTION 4. Breakage Account; Breakage Costs. (a) Breakage Account. There is hereby established with ABN AMRO a collateral account (the "Breakage Account") in the name and under the control of ABN AMRO into which Atlas shall deposit cash from time to time in accordance with the provisions of this Section 4. The balance from time to time in the Breakage Account shall be subject to withdrawal only as provided herein. (b) Investment of Balance in Breakage Account. Amounts on deposit in the Breakage Account shall be invested from time to time in Permitted Investments at the direction of Atlas; provided, that if Atlas shall fail to provide instructions with respect to the investment of any amounts in the Breakage Account not then invested in Permitted Investments at or before 12:00 noon Chicago time on any day such amounts are to be invested, ABN AMRO shall invest such amounts in Permitted Investments with a duration of 10 7 one day. Such Permitted Investments shall be held in the name and be under the control of ABN AMRO. (c) Pledge. As collateral security for the prompt payment in full when due of Atlas' obligations under this Section 4 (the "Breakage Obligations"), Atlas hereby pledges and grants to ABN AMRO a security interest in all of Atlas' right, title and interest in and to the Breakage Account and the amounts on deposit therein. If at any time Atlas shall fail to pay any Breakage Obligation when due, ABN AMRO may (in its sole discretion) (i) liquidate any investments made in respect of amounts deposited in the Breakage Account and (ii) apply or cause to be applied the balance from time to time outstanding to the credit of the Breakage Account to the payment of such Breakage Obligation. (d) Breakage. Atlas shall compensate ABN AMRO for any reasonable losses, costs or expenses (including, without limitation, any cost of funding or loss as a result of terminating, liquidating, obtaining or re- establishing any hedge or related trading position) (such losses, costs or expenses, "Breakage Costs") actually incurred as the result of (w) the withdrawal of any Deposit prior to the Maturity Date thereof or (x) the cancellation of any withdrawal with respect to which a notice has been delivered to the Depositary pursuant to Section 2.3(a) of the Deposit Agreement less than one Business Day prior to the scheduled date of such withdrawal (such withdrawal, termination, reset or (y) the termination of any Deposit Agreement pursuant to Section 3.2 thereof or (z) the reset of our Maturity Date (and/or the withdrawal of a Deposit on such reset Maturity Date) pursuant to Section 2.5 of any Deposit Agreement or cancellation, a "Breakage Event"). Atlas shall pay ABN AMRO an amount equal to the excess of any Breakage Costs actually incurred over any such costs recovered in accordance with Section 4(e) below within 5 days of demand by ABN AMRO of such payment. Together with such demand, ABN AMRO shall deliver to Atlas a certificate setting forth in reasonable detail such Breakage Costs and any amounts that ABN AMRO is entitled to receive pursuant to this Section 4(d) and shall be prima facie evidence of such amounts. (e) Anticipated Breakage Cost. (i) Without limiting the generality of the foregoing Section 4(d), if at any time Applicable LIBOR shall be equal to or greater than a rate per annum fifty basis points below the Blended Coupon Rate, ABN AMRO may deliver to Atlas notice of the Breakage Costs that ABN AMRO would incur with respect to each Deposit then still extant (such notice an "Anticipated Breakage Notice" and the date thereof a "Notice Date") from and including the relevant Notice Date to but excluding the Maturity Date of each such Deposit if a Breakage Event were to occur as of such Notice Date. Within 5 days of receipt of an Anticipated Breakage Notice, Atlas shall deposit into the Breakage Account an amount (the "Anticipated Breakage Cost") equal to: 11 8 (A) the aggregate amount of the Deposits, multiplied by (B) a rate per annum equal to the excess of Applicable LIBOR over a rate seventy-five basis points below the Blended Coupon Rate, multiplied by (C) the quotient of a number equal to the remaining weighted average life of the Deposits in days divided by 360. Such deposit shall be net of any amounts to be released to Atlas in accordance with Section 4(e)(iii) hereof. (ii) Upon the occurrence of a Breakage Event, ABN AMRO shall withdraw from the Breakage Account and apply to Atlas' obligation to pay Breakage Costs pursuant to this Section 4 an amount equal to the lesser of such Breakage Costs and the Anticipated Breakage Costs, if any, then on deposit in the Breakage Account. (iii) At any time that the amount on deposit in the Breakage Account (such amount, from time to time, the "Breakage Balance") exceed the Anticipated Breakage Costs that ABN AMRO would incur with respect to each Deposit extant on such date, Atlas may request the withdrawal and release of an amount equal to the excess of all amounts deposited and not previously released over such Anticipated Breakage Costs, together with any unreleased Investment Earnings on such excess. ABN AMRO shall release such amounts to Atlas within 5 days of receipt of such request. (f) Upon the later of: (i) the Deposit Agreement Termination Date and (ii) the payment in full of all Breakage Obligations due and payable on or prior to the Deposit Agreement Termination Date, ABN AMRO shall forthwith pay all amounts in the Breakage Account, together with any unreleased Investment Earnings thereon, to Atlas. SECTION 5. Overdue Amounts. (a) Atlas agrees to pay to ABN AMRO interest on any amount that shall not be paid by Atlas when due under this Agreement (an "Overdue Amount") at the Overdue Interest Rate, calculated on the basis of a year of 360 days and actual days elapsed; provided, however, that no such interest shall accrue on Overdue Amounts to the extent that ABN AMRO may in accordance with the provisions of 12 9 this Agreement, and does not, withdraw and apply in payment thereof amounts on deposit in the Collateral Account or the Breakage Account, as the case may be. Such interest shall accrue on the portion of any Overdue Amount remaining unpaid from time to time, from and including (or, in the case of amounts due pursuant to Sections 1(a) and 1(b) hereof, from but excluding) the date that such Overdue Amount is not paid when due to but excluding the date that it is paid in full. Overdue Amounts shall be payable on demand by ABN AMRO. (b) Without limiting the generality of the foregoing, amounts on deposit in the Collateral Account or the Breakage Account which ABN AMRO would be entitled to withdraw and apply in accordance with Section 1(e) or Section 4(e)(ii) hereof, but which ABN AMRO cannot so withdraw and apply due to the operation of the "automatic stay" provisions of the United States Bankruptcy Code, shall be deemed Overdue Amounts from and including the date as of which such provisions are in effect to but excluding the date on which ABN AMRO is permitted to apply and withdraw them. SECTION 6. Representations and Warranties. (A) Atlas represents and warrants to ABN AMRO that: (a) Atlas is a corporation duly incorporated, validly existing and in good standing under the Laws of the State of Delaware and has the corporate power and authority to conduct the business in which it is currently engaged and to own or hold under lease its properties and to enter into and perform its obligations under this Agreement. Atlas is duly qualified to do business as a foreign corporation in good standing in each jurisdiction in which the nature and extent of the business conducted by it, or the ownership of its properties, requires such qualification except where the failure to be so qualified would not reasonably be expected to give rise to a Material Adverse Change to Atlas. (b) Atlas has taken, or caused to be taken, all necessary corporate action (including, without limitation, the obtaining of any consent or approval of stockholders required by its Certificate of Incorporation or By-Laws) to authorize the execution and delivery of this Agreement, and the performance of its obligations hereunder. (c) The execution and delivery by Atlas of this Agreement, the performance by Atlas of its obligations hereunder and the consummation by Atlas of the transactions contemplated hereby, do not and will not (i) violate any provision of the Certificate of Incorporation or By-Laws of Atlas, (ii) violate any Law applicable to or binding on Atlas, or (iii) violate or constitute any default under (other than any violation or default that would not reasonably be expected to result in a Material Adverse Change to Atlas), or result in the creation of any Lien (other than as permitted under any lease and other than the Liens contemplated hereby) upon any of 13 10 the collateral hereunder under, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, lease, loan or other material agreement, instrument or document to which Atlas is a party or by which Atlas or any of its properties is bound or affected. (d) The execution and delivery by Atlas of this Agreement, the performance by Atlas of its obligations hereunder and the consummation by Atlas of the transactions contemplated hereby do not and will not require the consent or approval of, or the giving of notice to, or the registration with, or the recording or filing of any documents with, or the taking of any other action in respect of, (i) any trustee or other holder of any debt of Atlas and (ii) any Government Entity, other than filings, recordings, notices or other ministerial actions pursuant to any routine recording, contractual or regulatory requirements applicable to it. (e) This Agreement has been duly authorized, executed and delivered by Atlas and, assuming the due authorization, execution and delivery thereof by the other party hereto, constitutes the legal, valid and binding obligations of Atlas and is enforceable against Atlas in accordance with the terms hereof, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, receivership, moratorium and other similar Laws affecting the rights of creditors generally and general principles of equity, whether considered in a proceeding at law or in equity and except as rights to indemnification may be limited by federal or state securities laws or principles of public policy. (f) Except as set forth in Atlas' most recent Annual Report on Form 10-K, as amended, filed by Atlas with the SEC on or prior to the date hereof, or in any Quarterly Report on Form 10-Q or Current Report on Form 8-K filed by Atlas with the SEC subsequent to such Annual Report on Form 10-K and on or prior to the date hereof, no action, claim or proceeding is now pending or, to the Actual Knowledge of Atlas threatened, against Atlas before any court, governmental body, arbitration, board, tribunal or administrative agency, which is reasonably likely to be determined adversely to Atlas and if determined adversely to Atlas would reasonably be expected to result in a Material Adverse Change with respect to Atlas. (g) The audited consolidated balance sheet of Atlas with respect to Atlas' most recent fiscal year included in Atlas' most recent Annual Report on Form 10-K, as amended, filed by Atlas with the SEC, and the related consolidated statements of operations and cash flows for that period then ended have been prepared in accordance with GAAP and fairly present in all material respects the financial condition of Atlas and its consolidated subsidiaries as of such date and the results of its operations and cash flows for such period, and since the date of such balance sheet there has been no material adverse change in such financial condition or operations of 14 11 Atlas, except for matters disclosed in (a) the financial statements or Annual Report on Form 10-K referred to above, (b) any subsequent Quarterly Report on Form 10-Q or Current Report on Form 8-K filed by Atlas with the SEC on or prior to the date hereof or (c) the Offering Memorandum dated January 27, 1998 relating to the Atlas Air, Inc. Pass Through Certificates, Series 1998-1. (h) This Agreement creates a security interest in favor of ABN AMRO in the Collateral Account, the Breakage Account, the Collateral and the Breakage Balance and such security interest constitutes a first priority perfected security interest in favor of ABN AMRO. (i) There are no financing statements under the Uniform Commercial Code or similar law of any state or jurisdiction affecting any property, right or interests of Atlas in the Collateral Account, the Breakage Account, the Collateral or the Breakage Balance. (j) On each occasion on which Atlas delivers amounts to the Breakage Account or Collateral Account hereunder, Atlas shall be the owner of such collateral or other amounts and has the right to receive all payments on such collateral, in each case fee and clear of all liens and security interest other than the lien and security interest under this Agreement. Atlas further covenants that it will not create, permit or suffer to be created any other lien or security interest in the Collateral Account, the Breakage Account, the Collateral or the Breakage Balance. (B) ABN AMRO represents and warrants to Atlas that: (a) ABN AMRO is a banking institution duly organized, validly existing and in good standing under the Laws of the Netherlands and is duly qualified to conduct banking business in the State of Illinois through its Chicago Branch and has the corporate power and authority to enter into and perform its obligations under this Agreement. (b) ABN AMRO has taken, or caused to be taken, all necessary corporate action (including, without limitation, the obtaining of any consent or approval of stockholders required by its Certificate of Incorporation or By-Laws) to authorize the execution and delivery of this Agreement, and the performance of its obligations hereunder. (c) The execution and delivery by ABN AMRO of this Agreement, the performance by ABN AMRO of its obligations hereunder and the consummation by ABN AMRO of the transactions contemplated hereby, do not and will not (i) violate 15 12 any provision of the Certificate of Incorporation or By-Laws of ABN AMRO or (ii) violate any Law applicable to or binding on ABN AMRO. (d) The execution and delivery by ABN AMRO of this Agreement, the performance by ABN AMRO of its obligations hereunder and the consummation by ABN AMRO of the transactions contemplated hereby do not and will not require the consent or approval of, or the giving of notice to, or the registration with, or the recording or filing of any documents with, or the taking of any other action in respect of, (i) any trustee or other holder of any debt of ABN AMRO and (ii) any Government Entity, other than filings, recordings, notices or other ministerial actions pursuant to any routine recording, contractual or regulatory requirements applicable to it. (e) This Agreement has been duly authorized, executed and delivered by ABN AMRO and, assuming the due authorization, execution and delivery thereof by the other party hereto, constitutes the legal, valid and binding obligations of ABN AMRO and is enforceable against ABN AMRO in accordance with the terms hereof, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, receivership, moratorium and other similar Laws affecting the rights of creditors generally and general principles of equity, whether considered in a proceeding at law or in equity and except as rights to indemnification may be limited by federal or state securities laws or principles of public policy. SECTION 7. Conditions Precedent. The effectiveness of this Agreement shall be subject to the following conditions: (a) Atlas shall have received a certificate, dated the date hereof and signed by an executive officer of ABN AMRO, substantially in the form of Exhibit A hereto. (b) ABN AMRO shall have received (i) an opinion of Cahill Gordon & Reindel, counsel for Atlas, to the effect set forth in Exhibit B-1 hereto and (ii) an opinion of in-house legal counsel of Atlas, to the effect set forth in Exhibit B-2 hereto. (c) Atlas shall have received (i) an opinion of Vedder, Price, Kaufman & Kammholz, U.S. counsel for ABN AMRO, to the effect set forth in Exhibit C-1 hereto and (ii) an opinion of Clifford Chance, Netherlands counsel for Atlas, to the effect set forth in Exhibit C-2 hereto. SECTION 8. No Set-Off. All amounts (including, without limitation, those payments made in respect of Taxes (as defined and provided for below)) payable by Atlas to ABN AMRO hereunder shall be paid in U.S. Dollars and immediately available funds by 16 13 wire transfer to ABN AMRO Bank, New York, NY, ABA# 026009580, Account Name: ABN AMRO Bank N.V., Chicago Branch, Account No. 610-001-1789-41, Reference: Atlas 1998-1 or to such other account as ABN AMRO may direct from time to time in writing to Atlas. Except as set forth in the final sentence of Section 4(e)(i) hereof, to the extent permitted by applicable law, Atlas hereby waives any and all rights of set-off, combination of accounts, right of retention or similar right (whether arising under applicable law, contract or otherwise) it may have against ABN AMRO with respect to the Secured Obligations and the Breakage Obligations howsoever arising. All amounts payable hereunder shall be made free and clear of and without reduction for or on account of any and all taxes, levies or other impositions or charges ("Taxes"), other than taxes based on or measured by ABN AMRO'S net income, franchise taxes, or taxes required to be withheld as a result of ABN AMRO failing to provide Atlas with a properly executed IRS Form 4224 or successor form thereto (any such non-excluded taxes, collectively, "Indemnified Taxes"). If Atlas shall be required by law to deduct or withhold any Indemnified Taxes from or in respect of any sum payable hereunder, then Atlas shall (i) pay such additional amounts to ABN AMRO, as may be necessary in order that the actual amount received by the ABN AMRO, after such required deduction or withholding equals the sum it would have received had no such deductions or withholding been required to be made, (ii) make such deductions or withholding, and (iii) pay the full amount deducted or withheld (including in respect of such additional amounts) to the competent taxation authority. If the date on which any payment is due would otherwise fall on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day, and no additional interest shall accrue in respect of such extension. SECTION 9. Increased Costs. In the event that any change in law or governmental rule, regulation or order, or in the interpretation, administration or application thereof (including the adoption of any new law or governmental rule, regulation or order), or any determination of a court or by any central bank or Government Entity, in each case that becomes effective after the date hereof, or compliance by ABN AMRO (at its applicable lending office) with any guideline, request or directive issued or made after the date hereof by any such central bank or Government Entity (whether or not having the force of law): (i) subjects ABN AMRO (or its applicable lending office) to any additional Indemnified Tax with respect to its obligations, commitments or extensions of credit hereunder or under any Deposit Agreement or any payments to ABN AMRO (or its applicable lending office) of any Indemnity Payment, interest, fees or any other amount payable under or in respect of this Agreement or any Deposit Agreement; or (ii) imposes, modifies or holds applicable any reserve (including any marginal, emergency, supplemental, special or other reserve), special deposit, compulsory loan, FDIC insurance or similar requirement against assets held by, or deposits in or for the account of, or advances or loans by, or other credit extended by, ABN AMRO; 17 14 and the result of any of the foregoing is that ABN AMRO shall incur increased costs which are attributable to this Agreement or any Deposit Agreements or to reduce any amount received or receivable by ABN AMRO (or its applicable lending office) with respect to this Agreement; then, in any such case, Atlas shall pay to ABN AMRO, within 15 days after receipt of the statement referred to in the next sentence, such additional amount or amounts as may be necessary to compensate ABN AMRO for any such increased cost or reduction in amounts received or receivable hereunder; provided that Atlas shall not be liable in respect of any such increased cost during such period ABN AMRO became aware and failed to notify Atlas promptly in accordance with the next sentence if and to the extent that prompt notice would have avoided or lessened payment by Atlas hereunder relating to such period. ABN AMRO, promptly after the occurrence of such event, shall deliver to Atlas a written statement, setting forth in reasonable detail the basis for calculating the additional amounts owed to ABN AMRO under this Section 9, which statement, absent manifest error, shall be prima facie evidence of such additional amounts. SECTION 10. Capital Adequacy. If the adoption after the date hereof of any applicable law, rule or regulation (or any provision thereof) regarding capital adequacy, or any change after the date hereof in any existing interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or the promulgation after the date hereof of any guidelines, request or directive regarding capital adequacy (whether or not having the force of law) of any such governmental authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on the capital of ABN AMRO or any corporation controlling ABN AMRO as a consequence of ABN AMRO's commitments, obligations or extensions of credit hereunder or under any Deposit Agreement to a level below that which ABN AMRO or such controlling corporation could have achieved but for such adoption, change or promulgation (taking into consideration the policies of ABN AMRO or such controlling corporation with regard to capital adequacy), then from time to time, within five Business Days after receipt by Atlas from ABN AMRO of the statement referred to in the next sentence, Atlas shall pay to ABN AMRO such additional amount or amounts as will compensate ABN AMRO or such controlling corporation on an after-tax basis for such reduction. ABN AMRO shall deliver to Atlas a written statement, setting forth in reasonable detail the basis of the calculation of such additional amounts, which statement, absent manifest error, shall be prima facie evidence of such additional amounts. SECTION 11. Fees. In consideration of the Depositary entering into this Agreement and the Deposit Agreements, Atlas agrees to pay ABN AMRO a nonrefundable advisory fee equal to $125,000 on the date hereof. SECTION 12. Expenses; Indemnity. (a) Atlas shall pay all reasonable out-of-pocket expenses incurred by ABN AMRO, including the reasonable fees, charges and 18 15 disbursements of counsel for ABN AMRO, in connection with the preparation of this Agreement or any amendments, modifications or waivers of the provisions hereof. (b) The provisions of Section 9.1 of the Leased Aircraft Participation Agreement attached as Exhibit A-1 to the Note Purchase Agreement, together with related definitions and ancillary provisions, are hereby incorporated herein by reference, as if set forth herein in full, mutatis mutandis; provided that as incorporated herein, (i) each reference therein to "this Agreement" shall be deemed to be a reference to this Agreement, (ii) each reference therein to "Indemnitee" shall be deemed to be a reference to ABN AMRO (in its capacity as Depositary) together with its affiliates, directors, officers, employees, agents, servants, successors and assigns, (iii) each reference therein to "Lessee" shall be deemed to be reference to Atlas, (iv) each reference therein to "Section 9", "Section 9.1" or any subsection of "Section 9.1" shall be deemed to be a reference to this Section 12(b), (v) each reference therein to "Operative Agreements" shall be deemed to be a reference to the "Operative Agreements" under each of the Participation Agreements, (vi) each reference therein to "Aircraft" shall be deemed to be a reference to the "Aircraft" under each of the Participation Agreements and (vii) the term "Pass Through Agreements" shall be deemed to include this Agreement. (c) All amounts due under this Section shall be paid no later than 10 days after written demand therefor. SECTION 13. Remedies. Upon the breach by any party hereto of any of its obligations under this Agreement, the other party may exercise any right or remedy that may be available to it under applicable law. Each party hereto (for the purposes of this Section 13, an "Indemnifying Party") agrees to indemnify and hold harmless the other party for any reasonable cost or expense incurred by such other party in connection with, or arising out of, the enforcement by such other party of this Agreement against the Indemnifying Party. SECTION 14. Amendment, Etc. This Agreement may not be amended, waived or otherwise modified except by an instrument in writing signed by the party against whom the amendment, waiver or other modification is sought to be enforced. SECTION 15. Notices. Unless otherwise expressly specified or permitted by the terms hereof, all notices, requests, demands, authorizations, directions, consents, waivers or documents provided or permitted by this Agreement to be made, given, furnished or filed shall be in writing, mailed by certified mail, postage prepaid, or by confirmed telecopy and 19 16 (i) if to Atlas, addressed to at its office at: ATLAS AIR, INC. 538 Commons Drive Golden, CO 80401 Attention: Chief Financial Officer Telecopier: 303-526-5051 (ii) if to ABN AMRO, addressed to it at its offices at: ABN AMRO BANK N.V., Chicago Branch 135 South LaSalle Street, Suite 660 Chicago, IL 60674-9135 Attention: Claudia Heldring Telecopier: 312-606-8428 and ABN AMRO BANK N.V., Chicago Branch 181 W. Madison Street Chicago, IL 60602 Attention: Money Markets Desk Telecopier: 312-904-9106 Whenever any notice in writing is required to be given by either of Atlas or ABN AMRO to the other, such notice shall be deemed given and such requirement satisfied when such notice is received. Any party hereto may change the address to which notices to such party will be sent by giving notice of such change to the other party to this Agreement. On or prior to the execution of this Agreement, Atlas has delivered to ABN AMRO a certificate containing specimen signatures of the representatives of Atlas who are authorized to give notices and instructions with respect to this Agreement. ABN AMRO may conclusively rely on such certificate until ABN AMRO receives written notice from Atlas to the contrary. SECTION 16. Entire Agreement. This Agreement (including all attachments hereto) sets forth all of the promises, covenants, agreements, conditions and understandings between ABN AMRO and Atlas with respect to the subject matter hereof and supersedes all 20 17 prior and contemporaneous agreements and undertakings, inducements or conditions, express or implied, oral or written. SECTION 17. Governing Law. This Agreement shall be governed by the Laws of the State of New York excluding (to the greatest extent permissible by law) any rule of law that would cause the application of the laws of any jurisdiction other than the State of New York. SECTION 18. Waiver of Jury Trial Right. EACH OF ABN AMRO AND ATLAS ACKNOWLEDGES AND ACCEPTS THAT IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT SUCH PARTY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY IRREVOCABLY WAIVES, TO THE GREATEST EXTENT PERMISSIBLE BY LAW, ITS RIGHT TO A TRIAL BY JURY. SECTION 19. Counterparts. This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one instrument. 21 IN WITNESS WHEREOF, ABN AMRO and Atlas have caused this Indemnity Agreement to be duly executed as of the day and year first above written. ABN AMRO BANK N.V., Chicago Branch By /s/ CLAUDIA C. HELDRING ------------------------------------- Name: Claudia C. Heldring Title: Vice President By /s/ LUKAS van der HOEF ------------------------------------- Name: Lukas van der Hoef Title: Vice President ATLAS AIR, INC. By /s/ RICHARD H. SHUYLER ------------------------------------- Name: Richard H. Shuyler Title: Chief Financial Officer Sr. Vice Pres., Finance; and Corporate Treasurer 22 Schedule I AIRCRAFT:
Manufacturer's Scheduled Delivery Aircraft Type Tail Number Serial Number Month ------------- ----------- ------------- ------------------ Boeing 747-400F N491MC 29252 July 1998 Boeing 747-400F N492MC 29253 August 1998 Boeing 747-400F N493MC 29254 October 1998 Boeing 747-400F N494MC 29255 November 1998 Boeing 747-400F N495MC 29256 December 1998
23 Schedule II DEPOSIT AGREEMENTS: Deposit Agreement (Class A) dated as of February 9, 1998 between the Depositary and the Escrow Agent (the "Class A Depositary Agreement"). Deposit Agreement (Class B) dated as of February 9, 1998 between the Depositary and the Escrow Agent (the "Class B Depositary Agreement"). Deposit Agreement (Class C) dated as of February 9, 1998 between the Depositary and the Escrow Agent (the "Class C Depositary Agreement"). DEPOSIT INTEREST RATE: ____% INITIAL COLLATERAL DEPOSIT: $_____________ 24 ANNEX A DEFINITIONS "Actual Knowledge" means as it applies to Atlas, actual knowledge of a Vice President or more senior officer of Atlas, or any other officer of Atlas, having responsibility for the transactions contemplated by this Agreement; provided that Atlas shall be deemed to have "Actual Knowledge" of any matter as to which it has received notice from ABN AMRO, such notice having been given pursuant to Section 15 hereof. "Aircraft" means the Aircraft set forth on Schedule I hereto. "Applicable LIBOR" means, during the first six months of the effectiveness of this Agreement, Six-Month LIBOR and, thereafter, Three-Month LIBOR. "Blended Coupon Rate" means the weighted average of the three Coupon Rates. "Business Day" means any day, other than a Saturday or a Sunday, on which commercial banks settle payments in New York, New York, Chicago, Illinois, Denver, Colorado and Wilmington, Delaware and, if such day relates to Applicable LIBOR, on which dealings in U.S. dollar deposits are carried out in the London interbank market. "Class A Depositary Agreement" shall have the meaning set forth in Schedule I to the Indemnity Agreement. "Class B Depositary Agreement" shall have the meaning set forth in Schedule I to the Indemnity Agreement. "Class C Depositary Agreement" shall have the meaning set forth in Schedule I to the Indemnity Agreement. "Coupon Rate" means a rate of interest per annum equal to (x) in the case of the Class A Deposit Agreement, 7.38%, (y) in the case of the Class B Deposit Agreement, 7.68% and (z) in the case of the Class C Deposit Agreement, 8.01%. "Delivery Period Termination Date" means June 30, 1999; provided, that if a labor strike or work stoppage occurs at The Boeing Company prior to such date, such date shall be extended by adding thereto the number of days that each such labor strike or work stoppage continues in effect. "Equipment Notes" has the meaning attributable thereto in the Note Purchase Agreement. 25 "Federal Funds Effective Rate" means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by ABN AMRO from three Federal funds brokers of recognized standing selected by it. "Federal Funds Index Rate" shall mean, for any day of determination, the Federal Funds Effective Rate for such day minus 1/8% per annum. "Final Withdrawal Date" means the date on which all of the Deposits are withdrawn and no re-deposits are made under the Deposit Agreements. "GAAP" means generally accepted accounting principles as set forth in the statements of financial accounting standards issued by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants, as such principles may at any time or from time to time be varied by any applicable financial accounting rules or regulations issued by the SEC and, with respect to any person, shall mean such principles applied on a basis consistent with prior periods except as may be disclosed in such person's financial statements. "Government Entity" means (a) any federal, state, provincial or similar government, and any body, board, department, commission, court, tribunal, authority, agency or other instrumentality of any such government or otherwise exercising any executive, legislative, judicial, administrative or regulatory functions of such government or (b) any other government entity having jurisdiction over any matter contemplated by this Agreement or relating to the observance or performance of the obligations of any of the parties to this Agreement. "Investment Earnings" on any amount, means investment earnings on such amount net of losses and investment expenses of ABN AMRO in making such investments. "Law" means (a) any constitution, treaty, statute, law, decree, regulation, order, rule or directive of any Government Entity, and (b) any judicial or administrative interpretation or application of, or decision under, any of the foregoing. "Leased Aircraft Participation Agreement" shall have the meaning set forth in the Note Purchase Agreement. "Lien" means any mortgage, pledge, lien, charge, claim, encumbrance, lease or security interest affecting the title to or any interest in property. A-2 26 "Material Adverse Change" means, with respect to any person, any event, condition or circumstance that materially and adversely affects such person's business or consolidated financial condition, or its ability to observe or perform its obligations, liabilities and agreements under this Agreement. "Maturity Date" means, with respect to any Deposit, the maturity date for such Deposit set forth on Schedule I of the related Deposit Agreement, as such date may from time to time be extended through the Delivery Period Termination Date. "Note Purchase Agreement" means the Note Purchase Agreement dated as of February 9, 1998 among Atlas, Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements referred to therein, Wilmington Trust Company, as Subordination Agent, Wilmington Trust Company as Loan Trustee under each of the Indentures referred to therein, First Security Bank N.A., as Escrow Agent, and Wilmington Trust Company, as Paying Agent. "Notice of Final Withdrawal" with respect to each Deposit Agreement, shall have the meaning set forth in such Deposit Agreement. "Notice of Purchase Withdrawal" with respect to each Deposit Agreement, shall have the meaning set forth in such Deposit Agreement. "Overdue Interest Rate" means a fluctuating interest rate per annum in effect from time to time, which rate shall at all times be equal to (a) the Federal Funds Effective Rate plus (b) two and one quarter percent (2.25%). "Participation Agreement" means each Participation Agreement entered into in connection with the financing of each Aircraft (or a Substitute Aircraft in respect thereof). "Permitted Investments" means (i) time deposits with ABN AMRO, each for a term determined by Atlas of at least 7 days and no more than 30 days or (ii) overnight Federal funds. "Registration Date" means the 180th day after the date of the Issuance of the Certificates. "Registration Event" has the meaning set forth in the Registration Rights Agreement. "Scheduled Delivery Month" means, with respect to any Aircraft, the month set forth opposite such Aircraft under the heading "Scheduled Delivery Month" on Schedule I hereto. A-3 27 "SEC" means the Securities and Exchange Commission of the United States, or any Government Entity succeeding to the functions of such Securities and Exchange Commission. "Six-Month LIBOR" means, on any Notice Date, the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the rates per annum at which deposits in U.S. dollars are offered to major banks in the London interbank market at approximately 11:00 a.m. (London time) two Business Days before such Notice Date in an amount approximately equal to each Deposit or New Deposit extant on such Notice Date for a period of six months. "Substitute Aircraft" means any aircraft substituted for a Aircraft (or any other Substitute Aircraft with respect to such Aircraft) in accordance with (i) the Purchase Agreement (as defined in the Note Purchase Agreement) or (ii) Section 1(f) of the Note Purchase Agreement. "Three-Month LIBOR" means, on any Notice Date, the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the rates per annum at which deposits in U.S. dollars are offered to major banks in the London interbank market at approximately 11:00 a.m. (London time) two Business Days before such Notice Date in an amount approximately equal to each Deposit or New Deposit extant on such Notice Date for a period of three months. A-4 28 OFFICER'S CERTIFICATE Reference is made to the Indemnity Agreement, dated as of February 9, 1998 (the "Indemnity Agreement"), between ABN AMRO Bank N.V., acting through its Chicago Branch ("ABN AMRO") and Atlas Air, Inc. I, Claudia Heldring, a duly appointed, qualified and acting Vice President of ABN AMRO, DO HEREBY CERTIFY that: (i) the statements set forth in the Preliminary Offering Memorandum dated January 19, 1998, relating to the Atlas Air Pass Through Trust Certificates, Series 1998-1 on page 79 under the caption "DESCRIPTION OF THE DEPOSIT AGREEMENTS -- Depositary" were, on January 19, 1998, have been at all times since such date and are, on the date hereof, true and correct. (ii) the statements set forth in the Offering Memorandum dated January 27, 1998, relating to the Atlas Air Pass Through Trust Certificates, Series 1998-1 on page 78 under the caption "DESCRIPTION OF THE DEPOSIT AGREEMENTS -- Depositary" were, on January 27, 1998, have been at all times since such date and are, on the date hereof, true and correct. Capitalized terms used and not defined herein have the respective meanings set forth in the Indemnity Agreement. IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of February, 1998. By: ------------------------------------- Name: Title: 29 Attachment I [Attach language from Offering Memorandum describing ABN AMRO] 30 Exhibit B-1 Form of Opinion of Counsel for Atlas [CAHILL GORDON & REINDEL LETTERHEAD] February 9, 1998 ABN AMRO Bank N.V. Chicago Branch Ladies and Gentlemen: We have acted as special counsel to Atlas Air, Inc., a Delaware corporation ("Atlas"), in connection with the transactions contemplated by the Indemnity Agreement dated as of February 9, 1998 between you and Atlas (the "Indemnity Agreement"). Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Indemnity Agreement or, if not defined therein, the Deposit Agreements (as defined in the Indemnity Agreement). This opinion is furnished pursuant to Atlas' request. In arriving at the opinions expressed below, we have reviewed the following documents, each of which is dated as of the date hereof, except where otherwise indicated above or below: (a) an executed copy of the Indemnity Agreement, (b) an executed copy of each of the three Deposit Agreements, (c) an executed copy of the Note Purchase Agreement, (d) an executed copy of each of the three Pass Through Trust Agreements, (e) an executed copy of each of the three Escrow and Paying Agent Agreements, and (f) the documents delivered today by Atlas at the closing pursuant to the Placement Agreement dated January 27, 1998 among Morgan Stanley & Co. Incorporated, BT Alex Brown Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co., including copies of Atlas' Restated Certificate of Incorporation (the "Certificate of Incorporation") and By-Laws certified 31 B-2 by the Secretary of State of the State of Delaware and the Assistant Secretary of Atlas, respectively. We have considered such matters of law and fact, and relied upon such certificates of officers of Atlas and public officials, corporate records and other information furnished to us, including without limitation the certificates and representations referred to below, as we have deemed appropriate as a basis for the opinions set forth below. In arriving at the opinions expressed below, we have assumed the authenticity of all documents submitted to us as originals and the conformity to the originals of all documents submitted to us as copies. In addition, we have assumed and have not verified (i) the accuracy as to factual matters of each document we have reviewed and of the representations and warranties set forth therein, including without limitation the accuracy of the representations and warranties set forth in Section 5(a) of each of the Deposit Agreements and Section 5(i) of each of the Escrow Agreements, and (ii) that (x) the Indemnity Agreement and the Deposit Agreements have been duly authorized, executed and delivered by you and (y) you have satisfied those legal requirements that are applicable to you to the extent necessary to make the Indemnity Agreement and the Deposit Agreements enforceable against you and that each of the Indemnity Agreement and the Deposit Agreements is a valid, binding and enforceable obligation of ABN AMRO Bank N.V., Chicago Branch. Based on and subject to the foregoing, and to the other assumptions, qualifications and limitations set forth herein, it is our opinion that: 1. Atlas is validly existing as a corporation in good standing under the laws of the State of Delaware. 2. Atlas has the corporate power to enter the Indemnity Agreement and to perform its obligations thereunder. 3. The execution and delivery by Atlas of the Indemnity Agreement have been duly authorized by all necessary corporate action of Atlas, and the Indemnity Agreement has been duly executed and delivered by Atlas. The Indemnity Agreement is a valid and binding obligation of Atlas enforceable against Atlas in accordance with its terms. 4. Atlas is not an "investment company" and is not a company "controlled" by an "investment company", in each case within the meaning of the Investment Company Act of 1940, as amended. 5. The valid authorization, execution and delivery of the Indemnity Agreement by Atlas and the performance by Atlas of its respective obligations under 32 B-3 the Indemnity Agreement do not require Atlas to obtain or effect any consent, approval, authorization, registration or qualification of or with any governmental agency or body of the United States or of the State of New York. Neither the execution and delivery by Atlas of the Indemnity Agreement nor the consummation by Atlas of the transactions contemplated thereby to be consummated on the date hereof violates (i) Atlas' Certificate of Incorporation or By-Laws or (ii) any law or governmental rule or regulation known to us to be applicable to, or binding on, Atlas. The foregoing opinions are subject to the following assumptions, qualifications and limitations: (a) The opinions in paragraph 3 above are subject to (i) bankruptcy, insolvency, fraudulent transfer, fraudulent conveyance or other similar laws affecting the rights or remedies of creditors generally and (ii) general principles of equity (including without limitation doctrines of reasonableness and good faith and the possible unavailability of specific performance or injunctive relief and the general discretion of the court considering the matter), regardless of whether enforceability is considered in a proceeding in equity or at law. (b) We express no opinion as the enforceability of any provision contained in the Indemnity Agreement (i) that purports to establish or may be construed to establish evidentiary standards or (ii) as such provision relates to the jurisdiction of federal courts. (c) Provisions of the Indemnity Agreement which permit any Person to take action or make determinations, or to benefit from indemnities, contribution agreements or similar undertakings, or waivers, exculpatory provisions or similar provisions, may be subject to limitations imposed by law or by public policy considerations. (d) Insofar as the foregoing opinions relate to the valid existence and good standing of Atlas, they are based solely on a certificate of good standing received from the Secretary of State of the State of Delaware. (e) The foregoing opinions are limited to the law of the State of New York, the federal law of the United States of America and the General Corporation Law of the State of Delaware, in each case as in effect on the date hereof, except that we express no opinion with respect to (i) the laws, regulations or ordinances of any county, town or municipality or governmental subdivision or agency thereof, (ii) state securities or blue sky laws or, except as set forth in paragraph 4 above, federal securities laws, including without limitation the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, (iii) any federal or state tax, 33 B-4 antitrust or fraudulent transfer or conveyance laws, (iv) the Employee Retirement Income Security Act of 1974, as amended, or (v) federal aviation laws and other federal laws relating to the operation and maintenance of the Aircraft by Atlas. In addition, our opinions are based upon a review of those laws, statutes, rules and regulations which, in our experience, are normally applicable to transactions of the type contemplated by the Indemnity Agreement. We are furnishing this opinion letter to you solely for your benefit. This opinion letter is not to be used, circulated, quoted or otherwise referred to for any other purpose whatsoever without in each instance our prior written consent. This opinion letter speaks only as of the date hereof and we disclaim any obligation to advise you of changes of law or fact that occur after the date hereof. Very truly yours, 34 Exhibit B-2 Form of Opinion of In-House Legal Counsel of Atlas [ATLAS LETTERHEAD] February 9, 1998 ABN AMRO Branch N.V., Chicago Branch Ladies and Gentlemen: I am the [please supply precise title] of Atlas Air, Inc., a Delaware corporation ("Atlas"). In such capacity, I and persons on my legal staff have acted as counsel to Atlas in connection with the transactions contemplated by the Indemnity Agreement dated as of February 9, 1998 between you and Atlas (the "Indemnity Agreement"). Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Indemnity Agreement or, if not defined therein, the Deposit Agreement (as defined in the Indemnity Agreement). In arriving at the opinions expressed below, I or members of my legal staff have reviewed the following documents, each of which is dated as of the date hereof, except where otherwise indicated above or below: (a) an executed copy of the Indemnity Agreement, (b) an executed copy of each of the three Deposit Agreements, (c) an executed copy of the Note Purchase Agreement, (d) an executed copy of each of the three Pass Through Trust Agreements, (e) an executed copy of each of the three Escrow Agreements, and (f) the documents delivered today by Atlas at the closing pursuant to the Placement Agreement dated January 27, 1998 among Morgan Stanley & Co. Incorporated, BT Alex. Brown Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co., including copies of Atlas' Restated Certificate of Incorporation (the "Certificate of Incorporation") and By-Laws certified by the Secretary of State of the State of Delaware and the Assistant Secretary of Atlas, respectively. 35 B2-2 In addition, I or members of my legal staff have reviewed the originals or copies certified or otherwise identified to my or their satisfaction of all such corporate records of Atlas and its Subsidiaries (as defined below) and such other instruments and other certificates of public officials, officers and representatives of Atlas and such other persons, and I or members of my legal staff have made such investigations of law, as I deemed appropriate as a basis for the opinions expressed below. In arriving at the opinions expressed below, I and members of my legal staff have assumed the authenticity of all documents submitted to us as originals and the conformity to the originals of all documents submitted to us as copies. In addition, I and members of my legal staff have assumed and have not verified the accuracy as to factual matters of each document I or they have reviewed. As used herein, the phrase "to my knowledge" shall mean to my actual knowledge after reasonable investigation, but shall not be interpreted to impute to me knowledge of others. Based on the foregoing, and subject to the further assumptions, qualifications and limitations set forth below, it is my opinion that: 1. Each of (i) Atlas and (ii) Atlas One, Inc., Atlas Freighter Leasing, Inc., Atlas Freighter Leasing II, Inc., Atlas Air Services Limited, LHC Properties, Inc., Atlas Freightlease, Inc. and Genessee Insurance Company, Ltd. (together, the "Subsidiaries") has been duly incorporated and is an existing corporation in good standing under the laws of the jurisdiction of its incorporation, with corporate power to own, lease and operate its properties and conduct its business as described in the Offering Memorandum; each of Atlas and its Subsidiaries is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified would not have a material adverse effect on the business or consolidated financial condition of Atlas and the Subsidiaries taken as a whole. 2. To my knowledge, except as disclosed in the Offering Memorandum, there is no action, suit or proceeding before or by any governmental agency or body or court, domestic or foreign, now pending against Atlas or any of the Subsidiaries or any of their respective properties that will have a material adverse effect on the ability of Atlas to perform its obligations under the Indemnity Agreement. 3. Atlas is a "citizen of the United States" within the meaning of Section 40102(a)(15) of Title 49 of the United States Code, as amended, holding an air carrier operating certificate issued by the Secretary of Transportation pursuant to 36 B2-3 Chapter 447 of Title 49 of the United States Code, as amended, for aircraft capable of carrying 10 or more individuals or 6,000 pounds or more of cargo. 4. The execution, delivery and performance by Atlas of the Indemnity Agreement, and the consummation by Atlas of the transactions contemplated by the Indemnity Agreement, will not result in any violation of the provisions of the Certificate of Incorporation or By-Laws of Atlas or, to my knowledge, any applicable law, administrative regulation or any administrative or court decree, nor does any such action, to my knowledge, constitute a breach of, or default under, or (except as contemplated therein) result in the creation or imposition of any lien, charge or encumbrance upon any assets of Atlas or any of its subsidiaries pursuant to, any material contract, indenture, mortgage, loan agreement, note, lease or other instrument to which Atlas or any of its subsidiaries is a party or by which any of them are bound or to which any of the assets of Atlas or any of its subsidiaries is subject. 5. The valid authorization, execution and delivery of the Indemnity Agreement by Atlas and the performance by Atlas of its obligations under the Indemnity Agreement do not require Atlas to obtain or effect any consent, approval, authorization, registration or qualification of or with any governmental agency or body of the United States or the State of Colorado (but I express no opinion as to any consent, approval, authorization, registration or qualification that may be required under federal aviation laws or other federal laws relating to the operation or maintenance of aircraft by Atlas). The foregoing opinions are limited to the federal law of the United States of America, the General Corporation Law of the State of Delaware and the law of the State of Texas, in each case as in effect on the date hereof, except that I express no opinion with respect to (i) the laws, regulations or ordinances of any county, town or municipality or governmental subdivision or agency thereof, (ii) federal or state securities or blue sky laws, including without limitation the Securities Act and the Investment Company Act of 1940, as amended, (iii) any federal or state tax, antitrust or fraudulent transfer or conveyance laws or (iv) the Employee Retirement Income Security Act of 1974, as amended. In addition, my opinions are based upon a review of those laws, statutes, rules and regulations which, in our experience, are normally applicable to transactions of the type contemplated by the Indemnity Agreement. I am furnishing this opinion letter to you solely for your benefit in connection with the transactions described above. This opinion letter is not to be used, circulated, quoted or otherwise referred to by any other person or for any other purpose. This opinion letter speaks only as of the date hereof and I disclaim any obligation to advise you of changes of law or fact that occur after the date hereof. Very truly yours, 37 Exhibit C-1 Form of Opinion of U.S. Counsel for ABN AMRO [VEDDER, PRICE LETTERHEAD] February 9, 1998 Atlas Air, Inc. RE: ATLAS AIR, INC. PASS THROUGH CERTIFICATES SERIES 1998-1 Ladies and Gentlemen: We have acted as special counsel to ABN AMRO Bank N.V., Chicago Branch (the "Branch") in connection with the Indemnity Agreement dated February 9, 1998 (the "Indemnity Agreement") between Atlas Air, Inc. and the Branch. Capitalized terms used but not defined herein shall have the meaning ascribed to them in the Indemnity Agreement. In rendering the opinions set forth herein, we have examined the originals or copies, certified or otherwise identified to my satisfaction, of such records, certificates and documents as we have deemed necessary or relevant as basis for our opinion. In such examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity to originals of all documents we have examined or upon certificates of the Branch or its officer or of public officials or other persons. We have assumed for purposes of the opinion hereinafter set forth that the Indemnity Agreement has been duly authorized, executed and delivered by all parties thereto other than the Branch. We are members of the Bar of the State of Illinois and the State of New York and do not purport to be experts on, or to express any opinion herein concerning, any law other than the laws of the State of New York and the federal law of the United States of America. Without limiting the generality of the foregoing, we express no opinion as to the effect of the laws of any jurisdiction, other than the State of New York. Based upon and subject to the foregoing, we are of the opinion as follows: 1. The Branch is duly qualified to conduct banking business in the State of Illinois through its Chicago Branch, with power and authority to enter into and perform its obligations under the Indemnity Agreement. 38 C-2 2. The execution and delivery by the Branch of the Indemnity Agreement and the consummation of the transactions contemplated therein have been duly authorized by the Branch and will not violate, to the best of our knowledge, any law, governmental rule or regulation of the United States of America or the State of Illinois, its articles of association or by-laws, or any order, writ, injunction or decree of any court or governmental agency against it. 3. To our knowledge, there are no pending or threatened actions, suits, investigations or proceedings (whether or not purportedly on behalf of the Branch against or affecting the Branch of any of its property before or by any court or administrative agency which, individually or in the aggregate, if adversely determined, (i) would adversely affect the Branch's ability to perform its obligations under the Indemnity Agreement or (ii) would call in to question or challenge the validity of the Indemnity Agreement or the enforceability thereof. This opinion is rendered solely for your benefit in connection with the transaction contemplated by the Indemnity Agreement and is not to be circulated, quoted or otherwise referred to for any other purpose without our prior written permission. This opinion is referred only as of the date hereof, and we disclaim any obligation to supplement this opinion letter for events occurring or coming to our attention after the date hereof. Very truly yours, 39 Exhibit C-2 Form of Opinion of Netherlands Counsel for ABN AMRO [CLIFFORD CHANCE LETTERHEAD] Atlas Air, Inc. ATLAS AIR, INC. PASS THROUGH CERTIFICATES, SERIES 1998 - 1 -------------------------------------------- Ladies and Gentlemen: We have acted as Dutch legal counsel to ABN AMRO Bank N.V. ("ABN AMRO"), acting through its Chicago branch (the "Branch"), in connection with the Indemnity Agreement dated February 9, 1998 (the "Indemnity Agreement") between Atlas Air, Inc. ("Atlas") and ABN AMRO. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Indemnity Agreement. We have examined such documents and questions on law as we have considered necessary and appropriate for purposes of this opinion. No opinion is expressed as to any matters governed by any laws other than the laws of the Netherlands. We have assumed for the purpose of our opinion hereinafter expressed that the Indemnity Agreement to which ABN AMRO is a party will constitute the legal, valid and binding obligation of ABN AMRO in accordance with New York law and United States Federal Law. Based upon the foregoing (but limited in all respects to the laws of the Netherlands), we advise you that it is our opinion that: 1. ABN AMRO is a banking corporation duly organized and validly existing in good standing under the laws of the Netherlands and has full corporate power to execute, deliver and perform its obligations under the Indemnity Agreement. 2. No consent, approval, authorization, or order of, or filing with, any governmental agency or body or any court of the Netherlands is required for the valid authorization, execution and delivery by ABN AMRO of the Indemnity Agreement and for the consummation of the transactions contemplated therein except such as may have been obtained. 40 C2-2 3. The execution and delivery by the Depositary of the Indemnity Agreement and the consummation of the transactions contemplated therein have been duly authorized by ABN AMRO and will not violate any law, governmental rule or regulation of the Netherlands or its articles of association or bylaws. 4. The Indemnity Agreement has been duly authorized by ABN AMRO and, when duly executed and delivered by two authorized officers of the Branch, will constitute the legal, valid and binding obligations of ABN AMRO enforceable in accordance with its terms. 5. We have no knowledge of any pending or threatened actions, suits investigations or proceedings (whether or not purportedly on behalf of ABN AMRO) in the Netherlands against or affecting ABN AMRO or any of its property before or by any court or administrative agency which, individually or in the aggregate, if adversely determined, (i) would adversely affect ABN AMRO's ability to perform its obligations under the Indemnity Agreement or (ii) would call into question or challenge the validity of the Indemnity Agreement or the enforceability thereof. 6. Atlas will alternatively be able to proceed against ABN AMRO's Head Office in Amsterdam, the Netherlands, if the Branch defaults in its obligation to such party under the Indemnity Agreement. This opinion is limited to the matters expressly set forth above and no opinion is implied or may be inferred beyond the matters expressly so stated. This opinion is delivered to you in connection with the above- referenced transaction and may not be utilized or quoted by you for any other purpose whatsoever or delivered to any other person without our prior consent. Very truly yours 41 [MORGAN STANLEY LETTERHEAD] January __, 1998 To: The Persons Named on Schedule 1 Hereto Dear Ladies & Gentlemen: I am Counsel to Morgan Stanley Capital Services Inc., a Delaware corporation ("Morgan Stanley") and Morgan Stanley, Dean Witter & Discover & Co., a Delaware corporation ("MSDWD"), and have represented Morgan Stanley and MSDWD in connection with the Revolving Credit Agreements between Morgan Stanley and Atlas Air, Inc. Pass Through Trust 1998-1B and Atlas Air, Inc. Pass Through Trust 1998-1C dated as of January __, 1998 (the "Credit Agreements") and the Intercreditor Agreement among Morgan Stanley, ____________ and ___________ dated as of January __, 1998 (the "Intercreditor Agreement"). The Credit Agreement and the Intercreditor Agreement are referred to herein as the Liquidity Agreements. I have also represented MSDWD in connection with the related Guarantee, dated as of January __, 1998 (the "Guarantee"), of MSDWD. I have examined such corporate records, certificates and other documents, and such questions of law, as I have considered necessary or appropriate for the purposes of this opinion. Upon the basis of such examination, it is my opinion that: (1) Each of Morgan Stanley and MSDWD has been duly incorporated and is an existing corporation in good standing under the laws of the State of Delaware. (2) Each of Morgan Stanley and MSDWD has the corporate power and authority to enter into and perform its obligations under the Liquidity Agreements and the Guarantee, respectively. (3) Payments due under the Liquidity Agreements (assuming the Liquidity Agreements are valid and binding obligations of Morgan Stanley) and the Guarantee rank pari passu with the unsecured and unsubordinate obligations of Morgan Stanley and MSDWD, respectively. (4) The Liquidity Agreements have been duly authorized, executed and delivered by Morgan Stanley, the Guarantee has been duly authorized, executed and delivered by MSDWD and the Guarantee constitutes a valid and legally binding obligation of MSDWD enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar EX-10.100 14 ESCROW & PAYING AGENT AGREEMENT CLASS A 1 EXHIBIT 10.100 EXECUTION COPY ================================================================================ ESCROW AND PAYING AGENT AGREEMENT (Class A) Dated as of February 9, 1998 among FIRST SECURITY BANK, NATIONAL ASSOCIATION as Escrow Agent MORGAN STANLEY & CO. INCORPORATED BT ALEX. BROWN INCORPORATED DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION GOLDMAN, SACHS & CO. as Placement Agents WILMINGTON TRUST COMPANY not in its individual capacity, but solely as Pass Through Trustee for and on behalf of Atlas Air, Inc. Pass Through Trust 1998-1A-O as Pass Through Trustee and WILMINGTON TRUST COMPANY as Paying Agent ================================================================================ 2 TABLE OF CONTENTS
Page ---- SECTION 1. Escrow Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 1.01. Appointment of Escrow Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 1.02. Instruction; Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 1.03. Initial Escrow Amount; Issuance of Escrow Receipts . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 1.04. Payments to Receiptholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 1.05. Mutilated, Destroyed, Lost or Stolen Escrow Receipt . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 1.06. Additional Escrow Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 1.07. Resignation or Removal of Escrow Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 1.08. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 1.09. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 SECTION 2. Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 2.01. Appointment of Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 2.02. Establishment of Paying Agent Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 2.03. Payments from Paying Agent Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 2.04. Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 2.05. Resignation or Removal of Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 2.06. Notice of Final Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 SECTION 3. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 SECTION 4. Other Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 SECTION 5. Representations and Warranties of the Escrow Agent . . . . . . . . . . . . . . . . . . . . . . . . . 9
i 3
Page ---- SECTION 6. Representations and Warranties of the Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 SECTION 7. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 SECTION 8. Amendment, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 SECTION 9. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 SECTION 10. Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 11. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 12. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 13. Waiver of Jury Trial Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 14. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Exhibit A Escrow Receipt Exhibit B Withdrawal Certificate Exhibit C Prepayment Withdrawal Certificate
ii 4 ESCROW AND PAYING AGENT AGREEMENT (Class A) dated as of February 9, 1998 (as amended, modified or supplemented from time to time, this "Agreement") among FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, as Escrow Agent (in such capacity, together with its successors in such capacity, the "Escrow Agent"); MORGAN STANLEY & CO. INCORPORATED, BT ALEX. BROWN INCORPORATED, DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION AND GOLDMAN, SACHS & CO., as Placement Agents of the Certificates referred to below (the "Placement Agents" and together with their respective transferees and assigns as registered owners of the Certificates, the "Investors") under the Placement Agreement referred to below; WILMINGTON TRUST COMPANY, a Delaware banking corporation, not in its individual capacity except as otherwise expressly provided herein, but solely as trustee (in such capacity, together with its successors in such capacity, the "Pass Through Trustee") under the Pass Through Trust Agreement referred to below; and WILMINGTON TRUST COMPANY, a Delaware banking corporation, as paying agent hereunder (in such capacity, together with its successors in such capacity, the "Paying Agent"). W I T N E S S E T H WHEREAS, Atlas Air, Inc. ("Atlas") and the Pass Through Trustee have entered into the Pass Through Trust Agreement, dated as of February 9, 1998 (together, as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Pass Through Trust Agreement") relating to Atlas Air, Inc. Pass Through Trust 1998-1A-O (the "Pass Through Trust") pursuant to which the Atlas Air Pass Through Trust, Series 1998-1A-O Certificates referred to therein (the "Certificates") are being issued; WHEREAS, Atlas and the Placement Agents have entered into a Placement Agreement dated as of January 27, 1998 (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Placement Agreement") pursuant to which the Pass Through Trustee will issue and sell the Certificates to the Placement Agents; WHEREAS, Atlas, the Pass Through Trustee, certain other pass through trustees and certain other persons concurrently herewith are entering into the Note Purchase Agreement, dated as of the date hereof (the "Note Purchase Agreement"), pursuant to which the Pass Through Trustee has agreed to acquire from time to time on or prior to the Cut- Off Date (as defined in the Note Purchase Agreement) equipment notes (the "Equipment Notes") issued to finance the acquisition of aircraft by Atlas, as lessee or as owner, utilizing a portion of the proceeds from the sale of the Certificates (the "Net Proceeds"); WHEREAS, the Placement Agents and the Pass Through Trustee intend that the Net Proceeds be held in escrow by the Escrow Agent on behalf of the Investors, subject to withdrawal upon request by the Pass Through Trustee and satisfaction of the conditions set forth in the Note Purchase Agreement for the purpose of purchasing Equipment Notes, and that pending such withdrawal the Net Proceeds be deposited on behalf of the Escrow Agent 5 with ABN AMRO Bank N.V., a banking institution organized under the laws of the Netherlands, acting through its Chicago Branch, as Depositary (the "Depositary") under the Deposit Agreement, dated as of the date hereof between the Depositary and the Escrow Agent relating to the Pass Through Trust (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Deposit Agreement") pursuant to which, among other things, the Depositary will pay interest for distribution to the Investors and establish accounts from which the Escrow Agent shall make withdrawals upon request of and proper certification by the Pass Through Trustee; WHEREAS, the Escrow Agent wishes to appoint the Paying Agent to pay amounts required to be distributed to the Investors in accordance with this Agreement; and WHEREAS, capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Pass Through Trust Agreement. NOW, THEREFORE, in consideration of the obligations contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1. Escrow Agent. Section 1.01. Appointment of Escrow Agent. Each of the Placement Agents, for and on behalf of each of the Investors, hereby irrevocably appoints, authorizes and directs the Escrow Agent to act as escrow agent and fiduciary hereunder and under the Deposit Agreement for such specific purposes and with such powers as are specifically delegated to the Escrow Agent by the terms of this Agreement, together with such other powers as are reasonably incidental thereto. Any and all money received and held by the Escrow Agent under this Agreement or the Deposit Agreement shall be held in escrow by the Escrow Agent in accordance with the terms of this Agreement. This Agreement is irrevocable and the Investors' rights with respect to any monies received and held in escrow by the Escrow Agent under this Agreement or the Deposit Agreement shall only be as provided under the terms and conditions of this Agreement and the Deposit Agreement. The Escrow Agent (which term as used in this sentence shall include reference to its affiliates and its own and its affiliates' officers, directors, employees and agents): (a) shall have no duties or responsibilities except those expressly set forth in this Agreement; (b) shall not be responsible to the Pass Through Trustee or the Investors for any recitals, statements, representations or warranties of any person other then itself contained in this Agreement or the Deposit Agreement or for the failure by the Pass Through Trustee, the Investors or any other person or entity (other than the Escrow Agent) to perform any of its obligations hereunder (whether or not the Escrow Agent shall have any knowledge thereof); and (c) shall not be responsible for any action taken or omitted to be taken by it hereunder or provided for herein or in connection herewith, except for its own willful misconduct or gross negligence (or simple negligence in connection with the handling of funds). 2 6 Section 1.02. Instruction; Etc. The Placement Agents, for and on behalf of each of the Investors, hereby irrevocably instruct the Escrow Agent, and the Escrow Agent agrees, (a) to enter into the Deposit Agreement, (b) to appoint the Paying Agent as provided in this Agreement, (c) upon receipt at any time and from time to time prior to the Delivery Period Termination Date (as defined in the Note Purchase Agreement) of a certificate substantially in the form of Exhibit B hereto (a "Withdrawal Certificate") executed by the Pass Through Trustee, together with an attached Notice of Purchase Withdrawal in substantially the form of Exhibit A to the Deposit Agreement duly completed by the Pass Through Trustee (the "Applicable Notice of Purchase Withdrawal" and the withdrawal to which it relates, a "Purchase Withdrawal"), immediately to execute the Applicable Notice of Purchase Withdrawal as Escrow Agent and transmit it to the Depositary by facsimile transmission in accordance with the Deposit Agreement; provided that, upon the request of the Pass Through Trustee after such transmission, the Escrow Agent shall cancel such Applicable Notice of Purchase Withdrawal, (d) upon receipt at any time and from time to time prior to the Delivery Period Termination Date (as defined in the Note Purchase Agreement) of a certificate substantially in the form of Exhibit C hereto (a "Prepayment Withdrawal Certificate") executed by the Pass Through Trustee, together with an attached Notice of Prepayment Withdrawal in substantially the form of Exhibit B to the Deposit Agreement duly completed by the Pass Through Trustee (the "Applicable Notice of Prepayment Withdrawal" and the withdrawal to which it relates, a "Prepayment Withdrawal"), immediately to execute the Applicable Notice of Prepayment Withdrawal as Escrow Agent and transmit it to the Depositary by facsimile transmission in accordance with the Deposit Agreement; provided that, upon the request of the Pass Through Trustee after such transmission, the Escrow Agent shall cancel such Applicable Notice of Prepayment Withdrawal, and (e) if there are any undrawn Deposits (as defined in the Deposit Agreement) on the earlier of (i) the Delivery Period Termination Date and (ii) the day on which the Escrow Agent receives notice from the Pass Through Trustee that the Pass Through Trustee's obligation to purchase Equipment Notes under the Note Purchase Agreement has terminated, to give notice to the Depositary (with a copy to the Paying Agent) substantially in the form of Exhibit C to the Deposit Agreement requesting a withdrawal of all of the remaining Deposits, together with accrued and unpaid interest on such Deposits to the date of withdrawal, on the 35th day after the date that such notice of withdrawal is given to the Depositary (or, if not a Business Day, on the next succeeding Business Day) (a "Final Withdrawal"), provided that if the day scheduled for the Final Withdrawal in accordance with the foregoing is within 10 days before or after a Regular Distribution Date, then the Escrow Agent shall request that such requested Final Withdrawal be made on such Regular Distribution Date (the date of such requested withdrawal, the "Final Withdrawal Date"). If for any reason the Escrow Agent shall have failed to give the Final Withdrawal Notice to the Depositary on or before June 29, 1999 (provided, that if a labor strike or work stoppage occurs at The Boeing Company prior to such date, such date shall be extended by adding thereto the number of days that each such labor strike or work stoppage continues in effect), and there are unwithdrawn Deposits on such date, the Final Withdrawal Date shall be deemed to be the Delivery Period Termination Date. 3 7 Section 1.03. Initial Escrow Amount; Issuance of Escrow Receipts. The Escrow Agent hereby directs the Placement Agents to, and the Placement Agents hereby acknowledge that on the date hereof they shall, irrevocably deliver to the Depositary on behalf of the Escrow Agent, an amount in U.S. dollars ("Dollars") and immediately available funds equal to $300,254,000 for deposit on behalf of the Escrow Agent with the Depositary in accordance with Section 2.1 of the Deposit Agreement. The Placement Agents hereby instruct the Escrow Agent, upon receipt of such sum from the Placement Agents, to confirm such receipt by executing and delivering to the Pass Through Trustee an Escrow Receipt in the form of Exhibit A hereto (an "Escrow Receipt"), (a) to be affixed by the Pass Through Trustee to each Certificate and (b) to evidence the same percentage interest (the "Escrow Interest") in the Account Amounts (as defined below) as the Fractional Undivided Interest in the Pass Through Trust evidenced by the Certificate to which it is to be affixed. The Escrow Agent shall provide to the Pass Through Trustee for attachment to each Certificate newly issued under and in accordance with the Pass Through Trust Agreement an executed Escrow Receipt as the Pass Through Trustee may from time to time request of the Escrow Agent. Each Escrow Receipt shall be registered by the Escrow Agent in a register (the "Register") maintained by the Escrow Agent in the same name and same manner as the Certificate to which it is attached and may not thereafter be detached from such Certificate to which it is to be affixed prior to the distribution of the Final Withdrawal (the "Final Distribution"). After the Final Distribution, no additional Escrow Receipts shall be issued and the Pass Through Trustee shall request the return to the Escrow Agent for cancellation of all outstanding Escrow Receipts. Section 1.04. Payments to Receiptholders. All payments and distributions made to holders of an Escrow Receipt (collectively "Receiptholders") in respect of the Escrow Receipt shall be made only from amounts deposited in the Paying Agent Account (as defined below) ("Account Amounts"). Each Receiptholder, by its acceptance of an Escrow Receipt, agrees that (a) it will look solely to the Account Amounts for any payment or distribution due to such Receiptholder pursuant to the terms of the Escrow Receipt and this Agreement and (b) it will have no recourse to Atlas, the Pass Through Trustee, the Paying Agent or the Escrow Agent, except as expressly provided herein or in the Pass Through Trust Agreement. No Receiptholder shall have any right to vote or in any manner otherwise control the operation and management of the Paying Agent Account or the obligations of the parties hereto, nor shall anything set forth herein, or contained in the terms of the Escrow Receipt, be construed so as to constitute the Receiptholders from time to time as partners or members of an association. Section 1.05. Mutilated, Destroyed, Lost or Stolen Escrow Receipt. If (a) any mutilated Escrow Receipt is surrendered to the Escrow Agent or the Escrow Agent receives evidence to its satisfaction of the destruction, loss or theft of any Escrow Receipt and (b) there is delivered to the Escrow Agent and the Pass Through Trustee such security, indemnity or bond, as may be required by them to hold each of them harmless, then, absent notice to the Escrow Agent or the Pass Through Trustee that such destroyed, lost or stolen Escrow Receipt has been acquired by a bona fide purchaser, and provided that the 4 8 requirements of Section 8-405 of the Uniform Commercial Code in effect in any applicable jurisdiction are met, the Escrow Agent shall execute, authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Escrow Receipt, a new Escrow Receipt or Escrow Receipts and of like Escrow Interest in the Account Amounts and bearing a number not contemporaneously outstanding. In connection with the issuance of any new Escrow Receipt under this Section 1.05, the Escrow Agent may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Pass Through Trustee and the Escrow Agent) connected therewith. Any duplicate Escrow Receipt issued pursuant to this Section 1.05 shall constitute conclusive evidence of the appropriate Escrow Interest in the Account Amounts, as if originally issued, whether or not the lost, stolen or destroyed Escrow Receipt shall be found at any time. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Escrow Receipts. Section 1.06. Additional Escrow Amounts. On the date of any Purchase Withdrawal, the Pass Through Trustee may re-deposit with the Depositary some or all of the amounts so withdrawn in accordance with Section 2.4 of the Deposit Agreement. Section 1.07. Resignation or Removal of Escrow Agent. Subject to the appointment and acceptance of a successor Escrow Agent as provided below, the Escrow Agent may resign at any time by giving 30 days' prior written notice thereof to the Investors, but may not otherwise be removed except for cause by the written consent of the Investors with respect to Investors representing Escrow Interests aggregating not less than a majority in interest in the Account Amounts (an "Action of Investors"). Upon any such resignation or removal, the Investors, by an Action of Investors, shall have the right to appoint a successor Escrow Agent. If no successor Escrow Agent shall have been so appointed and shall have accepted such appointment within 30 days after the retiring Escrow Agent's giving of notice of resignation or the removal of the retiring Escrow Agent, then the retiring Escrow Agent may appoint a successor Escrow Agent. Any successor Escrow Agent shall be a bank which has an office in the United States with a combined capital and surplus of at least $100,000,000. Upon the acceptance of any appointment as Escrow Agent hereunder by a successor Escrow Agent, such successor Escrow Agent shall enter into such documents as the Pass Through Trustee shall require and shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Escrow Agent, and the retiring Escrow Agent shall be discharged from its duties and obligations hereunder. No resignation or removal of the Escrow Agent shall be effective unless a written confirmation shall have been obtained from each of Moody's Investors Service, Inc., 5 9 Standard & Poor's Rating Group, a division of McGraw-Hill Inc., and Fitch IBCA, Inc. that the replacement of the Escrow Agent with the successor Escrow Agent will not result in (a) a reduction of the rating for the Certificates below the then current rating for the Certificates or (b) a withdrawal or suspension of the rating of the Certificates. Section 1.08. Persons Deemed Owners. Prior to due presentment of a Certificate for registration of transfer, the Escrow Agent and the Paying Agent may treat the Person in whose name any Escrow Receipt is registered (as of the day of determination) as the owner of such Escrow Receipt for the purpose of receiving distributions pursuant to this Agreement and for all other purposes whatsoever, and neither the Escrow Agent nor the Paying Agent shall be affected by any notice to the contrary. Section 1.09. Further Assurances. The Escrow Agent agrees to take such actions, and execute such other documents, as may be reasonably requested by the Pass Through Trustee in order to effectuate the purposes of this Agreement and the performance by the Escrow Agent of its obligations hereunder. SECTION 2. Paying Agent. Section 2.01. Appointment of Paying Agent. The Escrow Agent hereby irrevocably appoints and authorizes the Paying Agent to act as its paying agent hereunder, for the benefit of the Investors, for such specific purposes and with such powers as are specifically delegated to the Paying Agent by the terms of this Agreement, together with such other powers as are reasonably incidental thereto. Any and all money received and held by the Paying Agent under this Agreement or the Deposit Agreement shall be held in the Paying Agent Account for the benefit of the Investors. The Paying Agent (which term as used in this sentence shall include reference to its affiliates and its own and its affiliates' officers, directors, employees and agents): (a) shall have no duties or responsibilities except those expressly set forth in this Agreement, and shall not by reason of this Agreement be a trustee for the Escrow Agent; (b) shall not be responsible to the Escrow Agent for any recitals, statements, representations or warranties of any person other then itself contained in this Agreement or for the failure by the Escrow Agent or any other person or entity (other than the Paying Agent) to perform any of its obligations hereunder (whether or not the Paying Agent shall have any knowledge thereof); and (c) shall not be responsible for any action taken or omitted to be taken by it hereunder or provided for herein or in connection herewith, except for its own willful misconduct or gross negligence (or simple negligence in connection with the handling of funds). Section 2.02. Establishment of Paying Agent Account. The Paying Agent shall establish a deposit account (the "Paying Agent Account") at Wilmington Trust Company in the name of the Escrow Agent. It is expressly understood by the parties hereto that the Paying Agent is acting as the paying agent of the Escrow Agent hereunder and that no amounts on deposit in the Paying Agent Account constitute part of the Trust Property. 6 10 Section 2.03. Payments from Paying Agent Account. The Escrow Agent hereby irrevocably instructs the Paying Agent, and the Paying Agent agrees to act, as follows: (a) On each Interest Payment Date (as defined in the Deposit Agreement) or as soon thereafter as the Paying Agent has confirmed receipt in the Paying Agent Account from the Depositary of any amount in respect of accrued interest on the Deposits, the Paying Agent shall distribute out of the Paying Agent Account the entire amount deposited therein by the Depositary. There shall be so distributed to each Receiptholder of record on the 15th day (whether or not a Business Day) preceding such Interest Payment Date by check mailed to such Receiptholder, at the address appearing in the Register, such Receiptholder's pro rata share (based on the Escrow Interest in the Account Amounts held by such Receiptholder) of the total amount of interest deposited by the Depositary in the Paying Agent Account on such date, except that, with respect to Escrow Receipts registered on the Record Date in the name of a nominee of the Depository Trust Company ("DTC"), such distribution shall be made by wire transfer in immediately available funds to the account designated by DTC. (b) Upon the confirmation by the Paying Agent of receipt in the Paying Agent Account from the Depositary of any amount in respect of the Final Withdrawal, the Paying Agent shall forthwith distribute the entire amount of the Final Withdrawal deposited therein by the Depositary. There shall be so distributed to each Receiptholder of record on the 15th day (whether or not a Business Day) preceding the Final Withdrawal Date by check mailed to such Receiptholder, at the address appearing in the Register, such Receiptholder's pro rata share (based on the Escrow Interest in the Account Amounts held by such Receiptholder) of the total amount in the Paying Agent Account on account of such Final Withdrawal, except that, with respect to Escrow Receipts registered on the Record Date in the name of a nominee of DTC, such distribution shall be made by wire transfer in immediately available funds to the account designated by DTC. (c) If any payment of interest or principal in respect of the Final Withdrawal is not received by the Paying Agent within five days of the applicable date when due, then it shall be distributed to Receiptholders after actual receipt by the Paying Agent on the same basis as a Special Payment is distributed under the Pass Through Trust Agreement. (d) The Paying Agent shall include with any check mailed pursuant to this Section any notice required to be distributed under the Pass Through Trust Agreement that is furnished to the Paying Agent by the Pass Through Trustee. Section 2.04. Withholding Taxes. The Paying Agent shall exclude and withhold from each distribution of accrued interest on the Deposits (as defined in the Deposit Agreement) and any amount in respect of the Final Withdrawal any and all withholding taxes 7 11 applicable thereto as required by law. The Paying Agent agrees to act as such withholding agent and, in connection therewith, whenever any present or future taxes or similar charges are required to be withheld with respect to any amounts payable in respect of the Deposits (as defined in the Deposit Agreement) or the escrow amounts, to withhold such amounts and timely pay the same to the appropriate authority in the name of and on behalf of the Receiptholders, that it will file any necessary withholding tax returns or statements when due, and that, as promptly as possible after the payment thereof, it will deliver to each such Receiptholder appropriate documentation showing the payment thereof, together with such additional documentary evidence as such Receiptholder may reasonably request from time to time. The Paying Agent agrees to file any other information reports as it may be required to file under United States law. Section 2.05. Resignation or Removal of Paying Agent. Subject to the appointment and acceptance of a successor Paying Agent as provided below, the Paying Agent may resign at any time by giving 30 days' prior written notice thereof to the Escrow Agent, but may not otherwise be removed except for cause by the Escrow Agent. Upon any such resignation or removal, the Escrow Agent shall have the right to appoint a successor Paying Agent. If no successor Paying Agent shall have been so appointed and shall have accepted such appointment within 30 days after the retiring Paying Agent's giving of notice of resignation or the removal of the retiring Paying Agent, then the retiring Paying Agent may appoint a successor Paying Agent. Any Successor Paying Agent shall be a bank which has an office in the United States with a combined capital and surplus of at least $100,000,000. Upon the acceptance of any appointment as Paying Agent hereunder by a successor Paying Agent, such successor Paying Agent shall enter into such documents as the Escrow Agent shall require and shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Paying Agent, and the retiring Paying Agent shall be discharged from its duties and obligations hereunder. Section 2.06. Notice of Final Withdrawal. Promptly after receipt by the Paying Agent of notice that the Escrow Agent has requested a Final Withdrawal or that a Final Withdrawal will be made, the Paying Agent shall cause notice of the distribution of the Final Withdrawal to be mailed to each of the Receiptholders at its address as it appears in the Register. Such notice shall be mailed not less than 15 days prior to the Final Withdrawal Date. Such notice shall set forth: (i) the Final Withdrawal Date and the date for determining Receiptholders of record who shall be entitled to receive distributions in respect of the Final Withdrawal, (ii) the amount of the payment in respect of the Final Withdrawal for each $1,000 face amount Certificate (based on information provided by the Pass Through Trustee) and the amount thereof constituting unused Deposits (as defined in the Deposit Agreement) and interest thereon, and 8 12 (iii) if the Final Withdrawal Date is the same date as a Regular Distribution Date, the total amount to be received on such date for each $1,000 face amount Certificate (based on information provided by the Pass Through Trustee). Such mailing may include any notice required to be given to Certificateholders in connection with such distribution pursuant to the Pass Through Trust Agreement. SECTION 3. Payments. If, notwithstanding the instructions in Section 4 of the Deposit Agreement that all amounts payable to the Escrow Agent under the Deposit Agreement be paid by the Depositary directly to the Paying Agent or the Pass Through Trustee (depending on the circumstances), the Escrow Agent receives any payment thereunder, then the Escrow Agent shall forthwith pay such amount in Dollars and in immediately available funds by wire transfer to (a) in the case of a payment of accrued interest on the Deposits (as defined in the Deposit Agreement) or any Final Withdrawal, directly to the Paying Agent Account and (b) in the case of any Purchase Withdrawal, directly to the Pass Through Trustee or its designee as specified and in the manner provided in the Applicable Notice of Purchase Withdrawal. The Escrow Agent hereby waives any and all rights of set-off, combination of accounts, right of retention or similar right (whether arising under applicable law, contract or otherwise) it may have against amounts payable to the Paying Agent howsoever arising. SECTION 4. Other Actions. The Escrow Agent shall take such other actions under or in respect of the Deposit Agreement (including, without limitation, the enforcement of the obligations of the Depositary thereunder) as the Investors, by an Action of Investors, may from time to time request. SECTION 5. Representations and Warranties of the Escrow Agent. The Escrow Agent represents and warrants to Atlas, the Investors, the Paying Agent and the Pass Through Trustee as follows: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America; (ii) it has full power, authority and legal right to conduct its business and operations as currently conducted and to enter into and perform its obligations under this Agreement and the Deposit Agreement; (iii) the execution, delivery and performance of each of this Agreement and the Deposit Agreement have been duly authorized by all necessary corporate action on the part of it and do not require any stockholder approval, or approval or consent of any trustee or holder of any indebtedness or obligations of it, and each such document has been duly executed and delivered by it and constitutes its legal, valid and binding obligations 9 13 enforceable against it in accordance with the terms hereof or thereof except as such enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights generally (regardless of whether such enforceability is considered in a proceeding in equity or at law); (iv) no authorization, consent or approval of or other action by, and no notice to or filing with, any United States federal or state governmental authority or regulatory body is required for the execution, delivery or performance by it of this Agreement or the Deposit Agreement; (v) neither the execution, delivery or performance by it of this Agreement or the Deposit Agreement, nor compliance with the terms and provisions hereof or thereof, conflicts or will conflict with or results or will result in a breach or violation of any of the terms, conditions or provisions of, or will require any consent or approval under, any law, governmental rule or regulation or the charter documents, as amended, or bylaws, as amended, of it or any similar instrument binding on it or any order, writ, injunction or decree of any court or governmental authority against it or by which it or any of its properties is bound or any indenture, mortgage or contract or other agreement or instrument to which it is a party or by which it or any of its properties is bound, or constitutes or will constitute a default thereunder or results or will result in the imposition of any lien upon any of its properties; and (vi) there are no pending or, to its knowledge, threatened actions, suits, investigations or proceedings (whether or not purportedly on behalf of it) against or affecting it or any of its property before or by any court or administrative agency which, if adversely determined, (A) would adversely affect the ability of it to perform its obligations under this Agreement or the Deposit Agreement or (B) would call into question or challenge the validity of this Agreement or the Deposit Agreement or the enforceability hereof or thereof in accordance with the terms hereof or thereof, nor is the Escrow Agent in default with respect to any order of any court, governmental authority, arbitration board or administrative agency so as to adversely affect its ability to perform its obligations under this Agreement or the Deposit Agreement. SECTION 6. Representations and Warranties of the Paying Agent. The Paying Agent represents and warrants to Atlas, the Investors, the Escrow Agent and the Pass Through Trustee as follows: (i) it is a Delaware banking company duly organized and validly existing in good standing under the laws of its jurisdiction of incorporation; 10 14 (ii) it has full power, authority and legal right to conduct its business and operations as currently conducted and to enter into and perform its obligations under this Agreement; (iii) the execution, delivery and performance of this Agreement has been duly authorized by all necessary corporate action on the part of it and does not require any stockholder approval, or approval or consent of any trustee or holder of any indebtedness or obligations of it, and such document has been duly executed and delivered by it and constitutes its legal, valid and binding obligations enforceable against it in accordance with the terms hereof except as such enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights generally (regardless of whether such enforceability is considered in a proceeding in equity or at law); (iv) no authorization, consent or approval of or other action by, and no notice to or filing with, any United States federal or state governmental authority or regulatory body is required for the execution, delivery or performance by it of this Agreement; (v) neither the execution, delivery or performance by it of this Agreement, nor compliance with the terms and provisions hereof, conflicts or will conflict with or results or will result in a breach or violation of any of the terms, conditions or provisions of, or will require any consent or approval under, any law, governmental rule or regulation or the charter documents, as amended, or bylaws, as amended, of it or any similar instrument binding on it or any order, writ, injunction or decree of any court or governmental authority against it or by which it or any of its properties is bound or any indenture, mortgage or contract or other agreement or instrument to which it is a party or by which it or any of its properties is bound, or constitutes or will constitute a default thereunder or results or will result in the imposition of any lien upon any of its properties; and (vi) there are no pending or, to its knowledge, threatened actions, suits, investigations or proceedings (whether or not purportedly on behalf of it) against or affecting it or any of its property before or by any court or administrative agency which, if adversely determined, (A) would adversely affect the ability of it to perform its obligations under this Agreement or (B) would call into question or challenge the validity of this Agreement or the enforceability hereof in accordance with the terms hereof, nor is the Paying Agent in default with respect to any order of any court, governmental authority, arbitration board or administrative agency so as to adversely affect its ability to perform its obligations under this Agreement. 11 15 SECTION 7. Indemnification. Except for actions expressly required of the Escrow Agent or the Paying Agent hereunder, each of the Escrow Agent and the Paying Agent shall in all cases be fully justified in failing or refusing to act hereunder unless it shall have been indemnified by the party requesting such action in a manner reasonably satisfactory to it against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. In the event Atlas requests any amendment to any Operative Agreement (as defined in the Note Purchase Agreement), the Pass Through Trustee agrees to pay all reasonable fees and expenses (including, without limitation, fees and disbursements of counsel) of the Escrow Agent and the Paying Agent in connection therewith. SECTION 8. Amendment, Etc. Upon request of the Pass Through Trustee and approval by an Action of Investors, the Escrow Agent shall enter into an amendment to this Agreement, so long as such amendment does not adversely affect the rights or obligations of the Escrow Agent or the Paying Agent, provided that upon request of the Pass Through Trustee and without any consent of the Investors, the Escrow Agent shall enter into an amendment to this Agreement for any of the following purposes: (1) to correct or supplement any provision in this Agreement which may be defective or inconsistent with any other provision herein or to cure any ambiguity or correct any mistake or to modify any other provision with respect to matters or questions arising under this Agreement, provided that any such action shall not materially adversely affect the interests of the Investors; or (2) to comply with any requirement of the SEC, applicable law, rules or regulations of any exchange or quotation system on which the Certificates are listed or any regulatory body; or (3) to evidence and provide for the acceptance of appointment under this Agreement of a successor Escrow Agent, successor Paying Agent or successor Pass Through Trustee. SECTION 9. Notices. Unless otherwise expressly provided herein, any notice or other communication under this Agreement shall be in writing (including by facsimile) and shall be deemed to be given and effective upon receipt thereof. All notices shall be sent to (i) if to the Investors, as their respective names shall appear in the Register; (ii) if to the Escrow Agent, addressed to at its office at: FIRST SECURITY BANK, NATIONAL ASSOCIATION 79 South Main Street Salt Lake City, UT 84111 12 16 Attention: Corporate Trust Department Telecopier: 801-246-5053 (iii) if to the Pass Through Trustee, addressed to it at its office at: WILMINGTON TRUST COMPANY One Rodney Square 1100 N. Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Telecopier: 302-651-8882 (iv) if to the Paying Agent, addressed to it at its office at: WILMINGTON TRUST COMPANY One Rodney Square 1100 N. Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Telecopier: 302-651-8882 (v) in each case with a copy to Atlas, addressed to it at its office at: ATLAS AIR, INC. 538 Commons Drive Golden, CO 80401 Attention: Chief Financial Officer Telecopier: 303-526-5051 (or at such other address as any such party may specify from time to time in a written notice to the other parties). On or prior to the execution of this Agreement, the Pass Through Trustee has delivered to the Escrow Agent a certificate containing specimen signatures of the representatives of the Pass Through Trustee who are authorized to give notices and instructions with respect to this Agreement. The Escrow Agent may conclusively rely on such certificate until the Escrow Agent receives written notice from the Pass Through Trustee to the contrary. SECTION 10. Transfer. No party hereto shall be entitled to assign or otherwise transfer this Agreement (or any interest herein) other than (in the case of the Escrow Agent) to a successor escrow agent under Section 1.06 hereof or (in the case of the Paying Agent) to a successor paying agent under Section 2.04 hereof, and any purported 13 17 assignment in violation thereof shall be void. This Agreement shall be binding upon the parties hereto and their respective successors and (in the case of the Escrow Agent and the Paying Agent) their respective permitted assigns. Upon the occurrence of the Transfer (as defined below) contemplated by the Assignment and Assumption Agreement (as defined below), the Pass Through Trustee shall (without further act) be deemed to have transferred all of its right, title and interest in and to this Agreement to the trustee of the Successor Trust (as defined below) and, thereafter, the trustee of the Successor Trust shall be deemed to be the "Pass Through Trustee" hereunder with the rights and obligations of the "Pass Through Trustee" hereunder and each reference herein to "Atlas Air, Inc. Pass Through Trust "1998-1A-O" shall be deemed to be a reference to "Atlas Air, Inc. Pass Through Trust 1998-1A-S". The parties hereto hereby acknowledge and consent to the Transfer contemplated by the Assignment and Assumption Agreement. As used herein, "Transfer" means the transfers of the assets to the Successor Trust contemplated by the Assignment and Assumption Agreement; "Assignment and Assumption Agreement" means the Assignment and Assumption Agreement to be entered into between the Pass Through Trustee and the trustee of the Successor Trust, substantially in the form of Exhibit E to the Pass Through Trust Agreement; "Successor Trust" means the Atlas Air, Inc. Pass Through Trust 1998-1A-S. SECTION 11. Entire Agreement. This Agreement sets forth all of the promises, covenants, agreements, conditions and understandings among the Escrow Agent, the Paying Agent, the Placement Agents and the Pass Through Trustee with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements and undertakings, inducements or conditions, express or implied, oral or written. SECTION 12. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. SECTION 13. Waiver of Jury Trial Right. EACH OF THE ESCROW AGENT, THE PAYING AGENT, THE INVESTORS AND THE PASS THROUGH TRUSTEE ACKNOWLEDGES AND ACCEPTS THAT IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT SUCH PARTY IRREVOCABLY WAIVES ITS RIGHT TO A TRIAL BY JURY. SECTION 14. Counterparts. This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one instrument. 14 18 IN WITNESS WHEREOF, the Escrow Agent, the Paying Agent, the Placement Agents and the Pass Through Trustee have caused this Escrow and Paying Agent Agreement (Class A) to be duly executed as of the day and year first above written. FIRST SECURITY BANK, NATIONAL ASSOCIATION as Escrow Agent By /s/ C. SCOTT NIELSEN ----------------------------------- Name: C. Scott Nielsen Title: Vice President 19 MORGAN STANLEY & CO. INCORPORATED; BT ALEX. BROWN INCORPORATED; DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION; GOLDMAN, SACHS & CO., as Placement Agents By: MORGAN STANLEY & CO. INCORPORATED By /s/ TOM CAHILL ----------------------------------- Name: Title: WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as Pass Through Trustee for and on behalf of Atlas Air, Inc. Pass Through Trust 1998-1A-O By /s/ JAMES P. LAWLER ----------------------------------- Name: JAMES P. LAWLER Title: Vice President WILMINGTON TRUST COMPANY as Paying Agent By /s/ JAMES P. LAWLER ----------------------------------- Name: JAMES P. LAWLER Title: Vice President 20 EXHIBIT A ATLAS AIR, INC. 1998-1A ESCROW RECEIPT No. __ This Escrow Receipt evidences a fractional undivided interest in amounts ("Account Amounts") from time to time deposited into a certain paying agent account (the "Paying Agent Account") described in the Escrow and Paying Agent Agreement (Class A) dated as of February 9, 1998 (as amended, modified or supplemented from time to time, the "Escrow and Paying Agent Agreement") among First Security Bank, National Association, as Escrow Agent (in such capacity, together with its successors in such capacity, the "Escrow Agent"), Morgan Stanley & Co. Incorporated, BT Alex. Brown Incorporated, Donaldson, Lufkin Jenrette Securities Corporation and Goldman, Sachs & Co., as Placement Agents, Wilmington Trust Company as Pass Through Trustee (in such capacity, together with its successors in such capacity, the "Pass Through Trustee") and Wilmington Trust Company, as paying agent (in such capacity, together with its successors in such capacity, the "Paying Agent"). Capitalized terms not defined herein shall have the meanings assigned to them in the Escrow and Paying Agent Agreement. This Escrow Receipt is issued under and is subject to the terms, provisions and conditions of the Escrow and Paying Agent Agreement. By virtue of its acceptance hereof the holder of this Escrow Receipt assents and agrees to be bound by the provisions of the Escrow and Paying Agent Agreement and this Escrow Receipt. This Escrow Receipt represents a fractional undivided interest in amounts deposited from time to time in the Paying Agent Account, and grants or represents no rights, benefits or interests of any kind in respect of any assets or property other than such amounts. This Escrow Receipt evidences the same percentage interest in the Account Amounts as the Fractional Undivided Interest in the Pass Through Trust evidenced by the Certificate to which this Escrow Receipt is affixed. All payments and distributions made to Receiptholders in respect of the Escrow Receipt shall be made only from Account Amounts deposited in the Paying Agent Account. The holder of this Escrow Receipt, by its acceptance of this Escrow Receipt, agrees that it will look solely to the Account Amounts for any payment or distribution due to it pursuant to this Escrow Receipt and that it will not have any recourse to Atlas, the Pass Through Trustee, the Paying Agent or the Escrow Agent, except as expressly provided herein or in the Pass Through Trust Agreement. No Receiptholder of this Escrow Receipt shall have any right to vote or in any manner otherwise control the operation and management of the Paying Agent Account, nor shall anything set forth herein, or contained in the terms of this Escrow Receipt, be construed so as to constitute the Receiptholders from time to time as partners or members of an association. 21 This Escrow Receipt may not be assigned or transferred except in connection with the assignment or transfer of the Certificate to which this Escrow Receipt is affixed. After payment to the holder hereof of its Escrow Interest in the Final Distribution, upon the request of the Pass Through Trustee, the holder hereof will return this Escrow Receipt to the Pass Through Trustee. The Paying Agent may treat the person in whose name the Certificate to which this Escrow Receipt is attached as the owner hereof for all purposes, and the Paying Agent shall not be affected by any notice to the contrary. THIS ESCROW RECEIPT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the Escrow Agent has caused this Escrow Receipt to be duly executed. Dated: , 199 -------------- - FIRST SECURITY BANK, NATIONAL ASSOCIATION as Escrow Agent By ----------------------------------- Name: Title: 2 22 EXHIBIT B WITHDRAWAL CERTIFICATE (Class A) FIRST SECURITY BANK, NATIONAL ASSOCIATION as Escrow Agent Dear Sirs: Reference is made to the Escrow and Paying Agent Agreement, dated as of February 9, 1998 (the "Agreement"). We hereby certify to you that the conditions to the obligations of the undersigned to execute a Participation Agreement pursuant to the Note Purchase Agreement have been satisfied. Pursuant to Section 1.02(c) of the Agreement, please execute the attached Notice of Withdrawal and immediately transmit by facsimile to the Depositary, at (312) 606-8428, Attention: Claudia Heldring and (312) 904-9106, Attention: Money Market Desk. Very truly yours, WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Pass Through Trustee By ----------------------------------- Name: Dated: , 199 -------------- - 23 EXHIBIT C PREPAYMENT WITHDRAWAL CERTIFICATE (Class A) FIRST SECURITY BANK, NATIONAL ASSOCIATION as Escrow Agent Dear Sirs: Reference is made to the Escrow and Paying Agent Agreement, dated as of February 9, 1998 (the "Agreement"). Pursuant to Section 1.02(d) of the Agreement, please execute the attached Notice of Withdrawal and immediately transmit by facsimile to the Depositary, at (312) 606-8428, Attention: Claudia Heldring and (312) 904-9106, Attention: Money Market Desk. Very truly yours, WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Pass Through Trustee By ----------------------------------- Name: Dated: , 199 -------------- - EX-10.101 15 ESCROW & PAYING AGENT AGREEMENT 1 EXHIBIT 10.101 EXECUTION COPY ================================================================================ ESCROW AND PAYING AGENT AGREEMENT (Class B) Dated as of February 9, 1998 among FIRST SECURITY BANK, NATIONAL ASSOCIATION as Escrow Agent MORGAN STANLEY & CO. INCORPORATED BT ALEX. BROWN INCORPORATED DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION GOLDMAN, SACHS & CO. as Placement Agents WILMINGTON TRUST COMPANY not in its individual capacity, but solely as Pass Through Trustee for and on behalf of Atlas Air, Inc. Pass Through Trust 1998-1B-O as Pass Through Trustee and WILMINGTON TRUST COMPANY as Paying Agent ================================================================================ 2 TABLE OF CONTENTS
Page ---- SECTION 1. Escrow Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 1.01. Appointment of Escrow Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 1.02. Instruction; Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 1.03. Initial Escrow Amount; Issuance of Escrow Receipts . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 1.04. Payments to Receiptholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 1.05. Mutilated, Destroyed, Lost or Stolen Escrow Receipt . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 1.06. Additional Escrow Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 1.07. Resignation or Removal of Escrow Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 1.08. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 1.09. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 SECTION 2. Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 2.01. Appointment of Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 2.02. Establishment of Paying Agent Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 2.03. Payments from Paying Agent Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 2.04. Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 2.05. Resignation or Removal of Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 2.06. Notice of Final Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 SECTION 3. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 SECTION 4. Other Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 SECTION 5. Representations and Warranties of the Escrow Agent . . . . . . . . . . . . . . . . . . . . . . . . . 9
i 3
Page ---- SECTION 6. Representations and Warranties of the Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . 10 SECTION 7. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 SECTION 8. Amendment, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 SECTION 9. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 SECTION 10. Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 11. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 12. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 13. Waiver of Jury Trial Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 14. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Exhibit A Escrow Receipt Exhibit B Withdrawal Certificate Exhibit C Prepayment Withdrawal Certificate
ii 4 ESCROW AND PAYING AGENT AGREEMENT (Class B) dated as of February 9, 1998 (as amended, modified or supplemented from time to time, this "Agreement") among FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, as Escrow Agent (in such capacity, together with its successors in such capacity, the "Escrow Agent"); MORGAN STANLEY & CO. INCORPORATED, BT ALEX. BROWN INCORPORATED, DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION AND GOLDMAN, SACHS & CO., as Placement Agents of the Certificates referred to below (the "Placement Agents" and together with their respective transferees and assigns as registered owners of the Certificates, the "Investors") under the Placement Agreement referred to below; WILMINGTON TRUST COMPANY, a Delaware banking corporation, not in its individual capacity except as otherwise expressly provided herein, but solely as trustee (in such capacity, together with its successors in such capacity, the "Pass Through Trustee") under the Pass Through Trust Agreement referred to below; and WILMINGTON TRUST COMPANY, a Delaware banking corporation, as paying agent hereunder (in such capacity, together with its successors in such capacity, the "Paying Agent"). W I T N E S S E T H WHEREAS, Atlas Air, Inc. ("Atlas") and the Pass Through Trustee have entered into the Pass Through Trust Agreement, dated as of February 9, 1998 (together, as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Pass Through Trust Agreement") relating to Atlas Air, Inc. Pass Through Trust 1998-1B-O (the "Pass Through Trust") pursuant to which the Atlas Air Pass Through Trust, Series 1998-1B-O Certificates referred to therein (the "Certificates") are being issued; WHEREAS, Atlas and the Placement Agents have entered into a Placement Agreement dated as of January 27, 1998 (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Placement Agreement") pursuant to which the Pass Through Trustee will issue and sell the Certificates to the Placement Agents; WHEREAS, Atlas, the Pass Through Trustee, certain other pass through trustees and certain other persons concurrently herewith are entering into the Note Purchase Agreement, dated as of the date hereof (the "Note Purchase Agreement"), pursuant to which the Pass Through Trustee has agreed to acquire from time to time on or prior to the Cut- Off Date (as defined in the Note Purchase Agreement) equipment notes (the "Equipment Notes") issued to finance the acquisition of aircraft by Atlas, as lessee or as owner, utilizing a portion of the proceeds from the sale of the Certificates (the "Net Proceeds"); WHEREAS, the Placement Agents and the Pass Through Trustee intend that the Net Proceeds be held in escrow by the Escrow Agent on behalf of the Investors, subject to withdrawal upon request by the Pass Through Trustee and satisfaction of the conditions set forth in the Note Purchase Agreement for the purpose of purchasing Equipment Notes, and that pending such withdrawal the Net Proceeds be deposited on behalf of the Escrow Agent 5 with ABN AMRO Bank N.V., a banking institution organized under the laws of the Netherlands, acting through its Chicago Branch, as Depositary (the "Depositary") under the Deposit Agreement, dated as of the date hereof between the Depositary and the Escrow Agent relating to the Pass Through Trust (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Deposit Agreement") pursuant to which, among other things, the Depositary will pay interest for distribution to the Investors and establish accounts from which the Escrow Agent shall make withdrawals upon request of and proper certification by the Pass Through Trustee; WHEREAS, the Escrow Agent wishes to appoint the Paying Agent to pay amounts required to be distributed to the Investors in accordance with this Agreement; and WHEREAS, capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Pass Through Trust Agreement. NOW, THEREFORE, in consideration of the obligations contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1. Escrow Agent. Section 1.01. Appointment of Escrow Agent. Each of the Placement Agents, for and on behalf of each of the Investors, hereby irrevocably appoints, authorizes and directs the Escrow Agent to act as escrow agent and fiduciary hereunder and under the Deposit Agreement for such specific purposes and with such powers as are specifically delegated to the Escrow Agent by the terms of this Agreement, together with such other powers as are reasonably incidental thereto. Any and all money received and held by the Escrow Agent under this Agreement or the Deposit Agreement shall be held in escrow by the Escrow Agent in accordance with the terms of this Agreement. This Agreement is irrevocable and the Investors' rights with respect to any monies received and held in escrow by the Escrow Agent under this Agreement or the Deposit Agreement shall only be as provided under the terms and conditions of this Agreement and the Deposit Agreement. The Escrow Agent (which term as used in this sentence shall include reference to its affiliates and its own and its affiliates' officers, directors, employees and agents): (a) shall have no duties or responsibilities except those expressly set forth in this Agreement; (b) shall not be responsible to the Pass Through Trustee or the Investors for any recitals, statements, representations or warranties of any person other then itself contained in this Agreement or the Deposit Agreement or for the failure by the Pass Through Trustee, the Investors or any other person or entity (other than the Escrow Agent) to perform any of its obligations hereunder (whether or not the Escrow Agent shall have any knowledge thereof); and (c) shall not be responsible for any action taken or omitted to be taken by it hereunder or provided for herein or in connection herewith, except for its own willful misconduct or gross negligence (or simple negligence in connection with the handling of funds). 2 6 Section 1.02. Instruction; Etc. The Placement Agents, for and on behalf of each of the Investors, hereby irrevocably instruct the Escrow Agent, and the Escrow Agent agrees, (a) to enter into the Deposit Agreement, (b) to appoint the Paying Agent as provided in this Agreement, (c) upon receipt at any time and from time to time prior to the Delivery Period Termination Date (as defined in the Note Purchase Agreement) of a certificate substantially in the form of Exhibit B hereto (a "Withdrawal Certificate") executed by the Pass Through Trustee, together with an attached Notice of Purchase Withdrawal in substantially the form of Exhibit A to the Deposit Agreement duly completed by the Pass Through Trustee (the "Applicable Notice of Purchase Withdrawal" and the withdrawal to which it relates, a "Purchase Withdrawal"), immediately to execute the Applicable Notice of Purchase Withdrawal as Escrow Agent and transmit it to the Depositary by facsimile transmission in accordance with the Deposit Agreement; provided that, upon the request of the Pass Through Trustee after such transmission, the Escrow Agent shall cancel such Applicable Notice of Purchase Withdrawal, (d) upon receipt at any time and from time to time prior to the Delivery Period Termination Date (as defined in the Note Purchase Agreement) of a certificate substantially in the form of Exhibit C hereto (a "Prepayment Withdrawal Certificate") executed by the Pass Through Trustee, together with an attached Notice of Prepayment Withdrawal in substantially the form of Exhibit B to the Deposit Agreement duly completed by the Pass Through Trustee (the "Applicable Notice of Prepayment Withdrawal" and the withdrawal to which it relates, a "Prepayment Withdrawal"), immediately to execute the Applicable Notice of Prepayment Withdrawal as Escrow Agent and transmit it to the Depositary by facsimile transmission in accordance with the Deposit Agreement; provided that, upon the request of the Pass Through Trustee after such transmission, the Escrow Agent shall cancel such Applicable Notice of Prepayment Withdrawal, and (e) if there are any undrawn Deposits (as defined in the Deposit Agreement) on the earlier of (i) the Delivery Period Termination Date and (ii) the day on which the Escrow Agent receives notice from the Pass Through Trustee that the Pass Through Trustee's obligation to purchase Equipment Notes under the Note Purchase Agreement has terminated, to give notice to the Depositary (with a copy to the Paying Agent) substantially in the form of Exhibit C to the Deposit Agreement requesting a withdrawal of all of the remaining Deposits, together with accrued and unpaid interest on such Deposits to the date of withdrawal, on the 35th day after the date that such notice of withdrawal is given to the Depositary (or, if not a Business Day, on the next succeeding Business Day) (a "Final Withdrawal"), provided that if the day scheduled for the Final Withdrawal in accordance with the foregoing is within 10 days before or after a Regular Distribution Date, then the Escrow Agent shall request that such requested Final Withdrawal be made on such Regular Distribution Date (the date of such requested withdrawal, the "Final Withdrawal Date"). If for any reason the Escrow Agent shall have failed to give the Final Withdrawal Notice to the Depositary on or before June 29, 1999 (provided, that if a labor strike or work stoppage occurs at The Boeing Company prior to such date, such date shall be extended by adding thereto the number of days that each such labor strike or work stoppage continues in effect), and there are unwithdrawn Deposits on such date, the Final Withdrawal Date shall be deemed to be the Delivery Period Termination Date. 3 7 Section 1.03. Initial Escrow Amount; Issuance of Escrow Receipts. The Escrow Agent hereby directs the Placement Agents to, and the Placement Agents hereby acknowledge that on the date hereof they shall, irrevocably deliver to the Depositary on behalf of the Escrow Agent, an amount in U.S. dollars ("Dollars") and immediately available funds equal to $115,481,000 for deposit on behalf of the Escrow Agent with the Depositary in accordance with Section 2.1 of the Deposit Agreement. The Placement Agents hereby instruct the Escrow Agent, upon receipt of such sum from the Placement Agents, to confirm such receipt by executing and delivering to the Pass Through Trustee an Escrow Receipt in the form of Exhibit A hereto (an "Escrow Receipt"), (a) to be affixed by the Pass Through Trustee to each Certificate and (b) to evidence the same percentage interest (the "Escrow Interest") in the Account Amounts (as defined below) as the Fractional Undivided Interest in the Pass Through Trust evidenced by the Certificate to which it is to be affixed. The Escrow Agent shall provide to the Pass Through Trustee for attachment to each Certificate newly issued under and in accordance with the Pass Through Trust Agreement an executed Escrow Receipt as the Pass Through Trustee may from time to time request of the Escrow Agent. Each Escrow Receipt shall be registered by the Escrow Agent in a register (the "Register") maintained by the Escrow Agent in the same name and same manner as the Certificate to which it is attached and may not thereafter be detached from such Certificate to which it is to be affixed prior to the distribution of the Final Withdrawal (the "Final Distribution"). After the Final Distribution, no additional Escrow Receipts shall be issued and the Pass Through Trustee shall request the return to the Escrow Agent for cancellation of all outstanding Escrow Receipts. Section 1.04. Payments to Receiptholders. All payments and distributions made to holders of an Escrow Receipt (collectively "Receiptholders") in respect of the Escrow Receipt shall be made only from amounts deposited in the Paying Agent Account (as defined below) ("Account Amounts"). Each Receiptholder, by its acceptance of an Escrow Receipt, agrees that (a) it will look solely to the Account Amounts for any payment or distribution due to such Receiptholder pursuant to the terms of the Escrow Receipt and this Agreement and (b) it will have no recourse to Atlas, the Pass Through Trustee, the Paying Agent or the Escrow Agent, except as expressly provided herein or in the Pass Through Trust Agreement. No Receiptholder shall have any right to vote or in any manner otherwise control the operation and management of the Paying Agent Account or the obligations of the parties hereto, nor shall anything set forth herein, or contained in the terms of the Escrow Receipt, be construed so as to constitute the Receiptholders from time to time as partners or members of an association. Section 1.05. Mutilated, Destroyed, Lost or Stolen Escrow Receipt. If (a) any mutilated Escrow Receipt is surrendered to the Escrow Agent or the Escrow Agent receives evidence to its satisfaction of the destruction, loss or theft of any Escrow Receipt and (b) there is delivered to the Escrow Agent and the Pass Through Trustee such security, indemnity or bond, as may be required by them to hold each of them harmless, then, absent notice to the Escrow Agent or the Pass Through Trustee that such destroyed, lost or stolen Escrow Receipt has been acquired by a bona fide purchaser, and provided that the 4 8 requirements of Section 8-405 of the Uniform Commercial Code in effect in any applicable jurisdiction are met, the Escrow Agent shall execute, authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Escrow Receipt, a new Escrow Receipt or Escrow Receipts and of like Escrow Interest in the Account Amounts and bearing a number not contemporaneously outstanding. In connection with the issuance of any new Escrow Receipt under this Section 1.05, the Escrow Agent may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Pass Through Trustee and the Escrow Agent) connected therewith. Any duplicate Escrow Receipt issued pursuant to this Section 1.05 shall constitute conclusive evidence of the appropriate Escrow Interest in the Account Amounts, as if originally issued, whether or not the lost, stolen or destroyed Escrow Receipt shall be found at any time. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Escrow Receipts. Section 1.06. Additional Escrow Amounts. On the date of any Purchase Withdrawal, the Pass Through Trustee may re-deposit with the Depositary some or all of the amounts so withdrawn in accordance with Section 2.4 of the Deposit Agreement. Section 1.07. Resignation or Removal of Escrow Agent. Subject to the appointment and acceptance of a successor Escrow Agent as provided below, the Escrow Agent may resign at any time by giving 30 days' prior written notice thereof to the Investors, but may not otherwise be removed except for cause by the written consent of the Investors with respect to Investors representing Escrow Interests aggregating not less than a majority in interest in the Account Amounts (an "Action of Investors"). Upon any such resignation or removal, the Investors, by an Action of Investors, shall have the right to appoint a successor Escrow Agent. If no successor Escrow Agent shall have been so appointed and shall have accepted such appointment within 30 days after the retiring Escrow Agent's giving of notice of resignation or the removal of the retiring Escrow Agent, then the retiring Escrow Agent may appoint a successor Escrow Agent. Any successor Escrow Agent shall be a bank which has an office in the United States with a combined capital and surplus of at least $100,000,000. Upon the acceptance of any appointment as Escrow Agent hereunder by a successor Escrow Agent, such successor Escrow Agent shall enter into such documents as the Pass Through Trustee shall require and shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Escrow Agent, and the retiring Escrow Agent shall be discharged from its duties and obligations hereunder. No resignation or removal of the Escrow Agent shall be effective unless a written confirmation shall have been obtained from each of Moody's Investors Service, Inc., 5 9 Standard & Poor's Rating Group, a division of McGraw-Hill Inc., and Fitch IBCA, Inc. that the replacement of the Escrow Agent with the successor Escrow Agent will not result in (a) a reduction of the rating for the Certificates below the then current rating for the Certificates or (b) a withdrawal or suspension of the rating of the Certificates. Section 1.08. Persons Deemed Owners. Prior to due presentment of a Certificate for registration of transfer, the Escrow Agent and the Paying Agent may treat the Person in whose name any Escrow Receipt is registered (as of the day of determination) as the owner of such Escrow Receipt for the purpose of receiving distributions pursuant to this Agreement and for all other purposes whatsoever, and neither the Escrow Agent nor the Paying Agent shall be affected by any notice to the contrary. Section 1.09. Further Assurances. The Escrow Agent agrees to take such actions, and execute such other documents, as may be reasonably requested by the Pass Through Trustee in order to effectuate the purposes of this Agreement and the performance by the Escrow Agent of its obligations hereunder. SECTION 2. Paying Agent. Section 2.01. Appointment of Paying Agent. The Escrow Agent hereby irrevocably appoints and authorizes the Paying Agent to act as its paying agent hereunder, for the benefit of the Investors, for such specific purposes and with such powers as are specifically delegated to the Paying Agent by the terms of this Agreement, together with such other powers as are reasonably incidental thereto. Any and all money received and held by the Paying Agent under this Agreement or the Deposit Agreement shall be held in the Paying Agent Account for the benefit of the Investors. The Paying Agent (which term as used in this sentence shall include reference to its affiliates and its own and its affiliates' officers, directors, employees and agents): (a) shall have no duties or responsibilities except those expressly set forth in this Agreement, and shall not by reason of this Agreement be a trustee for the Escrow Agent; (b) shall not be responsible to the Escrow Agent for any recitals, statements, representations or warranties of any person other then itself contained in this Agreement or for the failure by the Escrow Agent or any other person or entity (other than the Paying Agent) to perform any of its obligations hereunder (whether or not the Paying Agent shall have any knowledge thereof); and (c) shall not be responsible for any action taken or omitted to be taken by it hereunder or provided for herein or in connection herewith, except for its own willful misconduct or gross negligence (or simple negligence in connection with the handling of funds). Section 2.02. Establishment of Paying Agent Account. The Paying Agent shall establish a deposit account (the "Paying Agent Account") at Wilmington Trust Company in the name of the Escrow Agent. It is expressly understood by the parties hereto that the Paying Agent is acting as the paying agent of the Escrow Agent hereunder and that no amounts on deposit in the Paying Agent Account constitute part of the Trust Property. 6 10 Section 2.03. Payments from Paying Agent Account. The Escrow Agent hereby irrevocably instructs the Paying Agent, and the Paying Agent agrees to act, as follows: (a) On each Interest Payment Date (as defined in the Deposit Agreement) or as soon thereafter as the Paying Agent has confirmed receipt in the Paying Agent Account from the Depositary of any amount in respect of accrued interest on the Deposits, the Paying Agent shall distribute out of the Paying Agent Account the entire amount deposited therein by the Depositary. There shall be so distributed to each Receiptholder of record on the 15th day (whether or not a Business Day) preceding such Interest Payment Date by check mailed to such Receiptholder, at the address appearing in the Register, such Receiptholder's pro rata share (based on the Escrow Interest in the Account Amounts held by such Receiptholder) of the total amount of interest deposited by the Depositary in the Paying Agent Account on such date, except that, with respect to Escrow Receipts registered on the Record Date in the name of a nominee of the Depository Trust Company ("DTC"), such distribution shall be made by wire transfer in immediately available funds to the account designated by DTC. (b) Upon the confirmation by the Paying Agent of receipt in the Paying Agent Account from the Depositary of any amount in respect of the Final Withdrawal, the Paying Agent shall forthwith distribute the entire amount of the Final Withdrawal deposited therein by the Depositary. There shall be so distributed to each Receiptholder of record on the 15th day (whether or not a Business Day) preceding the Final Withdrawal Date by check mailed to such Receiptholder, at the address appearing in the Register, such Receiptholder's pro rata share (based on the Escrow Interest in the Account Amounts held by such Receiptholder) of the total amount in the Paying Agent Account on account of such Final Withdrawal, except that, with respect to Escrow Receipts registered on the Record Date in the name of a nominee of DTC, such distribution shall be made by wire transfer in immediately available funds to the account designated by DTC. (c) If any payment of interest or principal in respect of the Final Withdrawal is not received by the Paying Agent within five days of the applicable date when due, then it shall be distributed to Receiptholders after actual receipt by the Paying Agent on the same basis as a Special Payment is distributed under the Pass Through Trust Agreement. (d) The Paying Agent shall include with any check mailed pursuant to this Section any notice required to be distributed under the Pass Through Trust Agreement that is furnished to the Paying Agent by the Pass Through Trustee. Section 2.04. Withholding Taxes. The Paying Agent shall exclude and withhold from each distribution of accrued interest on the Deposits (as defined in the Deposit Agreement) and any amount in respect of the Final Withdrawal any and all withholding taxes 7 11 applicable thereto as required by law. The Paying Agent agrees to act as such withholding agent and, in connection therewith, whenever any present or future taxes or similar charges are required to be withheld with respect to any amounts payable in respect of the Deposits (as defined in the Deposit Agreement) or the escrow amounts, to withhold such amounts and timely pay the same to the appropriate authority in the name of and on behalf of the Receiptholders, that it will file any necessary withholding tax returns or statements when due, and that, as promptly as possible after the payment thereof, it will deliver to each such Receiptholder appropriate documentation showing the payment thereof, together with such additional documentary evidence as such Receiptholder may reasonably request from time to time. The Paying Agent agrees to file any other information reports as it may be required to file under United States law. Section 2.05. Resignation or Removal of Paying Agent. Subject to the appointment and acceptance of a successor Paying Agent as provided below, the Paying Agent may resign at any time by giving 30 days' prior written notice thereof to the Escrow Agent, but may not otherwise be removed except for cause by the Escrow Agent. Upon any such resignation or removal, the Escrow Agent shall have the right to appoint a successor Paying Agent. If no successor Paying Agent shall have been so appointed and shall have accepted such appointment within 30 days after the retiring Paying Agent's giving of notice of resignation or the removal of the retiring Paying Agent, then the retiring Paying Agent may appoint a successor Paying Agent. Any Successor Paying Agent shall be a bank which has an office in the United States with a combined capital and surplus of at least $100,000,000. Upon the acceptance of any appointment as Paying Agent hereunder by a successor Paying Agent, such successor Paying Agent shall enter into such documents as the Escrow Agent shall require and shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Paying Agent, and the retiring Paying Agent shall be discharged from its duties and obligations hereunder. Section 2.06. Notice of Final Withdrawal. Promptly after receipt by the Paying Agent of notice that the Escrow Agent has requested a Final Withdrawal or that a Final Withdrawal will be made, the Paying Agent shall cause notice of the distribution of the Final Withdrawal to be mailed to each of the Receiptholders at its address as it appears in the Register. Such notice shall be mailed not less than 15 days prior to the Final Withdrawal Date. Such notice shall set forth: (i) the Final Withdrawal Date and the date for determining Receiptholders of record who shall be entitled to receive distributions in respect of the Final Withdrawal, (ii) the amount of the payment in respect of the Final Withdrawal for each $1,000 face amount Certificate (based on information provided by the Pass Through Trustee) and the amount thereof constituting unused Deposits (as defined in the Deposit Agreement) and interest thereon, and 8 12 (iii) if the Final Withdrawal Date is the same date as a Regular Distribution Date, the total amount to be received on such date for each $1,000 face amount Certificate (based on information provided by the Pass Through Trustee). Such mailing may include any notice required to be given to Certificateholders in connection with such distribution pursuant to the Pass Through Trust Agreement. SECTION 3. Payments. If, notwithstanding the instructions in Section 4 of the Deposit Agreement that all amounts payable to the Escrow Agent under the Deposit Agreement be paid by the Depositary directly to the Paying Agent or the Pass Through Trustee (depending on the circumstances), the Escrow Agent receives any payment thereunder, then the Escrow Agent shall forthwith pay such amount in Dollars and in immediately available funds by wire transfer to (a) in the case of a payment of accrued interest on the Deposits (as defined in the Deposit Agreement) or any Final Withdrawal, directly to the Paying Agent Account and (b) in the case of any Purchase Withdrawal, directly to the Pass Through Trustee or its designee as specified and in the manner provided in the Applicable Notice of Purchase Withdrawal. The Escrow Agent hereby waives any and all rights of set-off, combination of accounts, right of retention or similar right (whether arising under applicable law, contract or otherwise) it may have against amounts payable to the Paying Agent howsoever arising. SECTION 4. Other Actions. The Escrow Agent shall take such other actions under or in respect of the Deposit Agreement (including, without limitation, the enforcement of the obligations of the Depositary thereunder) as the Investors, by an Action of Investors, may from time to time request. SECTION 5. Representations and Warranties of the Escrow Agent. The Escrow Agent represents and warrants to Atlas, the Investors, the Paying Agent and the Pass Through Trustee as follows: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America; (ii) it has full power, authority and legal right to conduct its business and operations as currently conducted and to enter into and perform its obligations under this Agreement and the Deposit Agreement; (iii) the execution, delivery and performance of each of this Agreement and the Deposit Agreement have been duly authorized by all necessary corporate action on the part of it and do not require any stockholder approval, or approval or consent of any trustee or holder of any indebtedness or obligations of it, and each such document has been duly executed and delivered by it and constitutes its legal, valid and binding obligations 9 13 enforceable against it in accordance with the terms hereof or thereof except as such enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights generally (regardless of whether such enforceability is considered in a proceeding in equity or at law); (iv) no authorization, consent or approval of or other action by, and no notice to or filing with, any United States federal or state governmental authority or regulatory body is required for the execution, delivery or performance by it of this Agreement or the Deposit Agreement; (v) neither the execution, delivery or performance by it of this Agreement or the Deposit Agreement, nor compliance with the terms and provisions hereof or thereof, conflicts or will conflict with or results or will result in a breach or violation of any of the terms, conditions or provisions of, or will require any consent or approval under, any law, governmental rule or regulation or the charter documents, as amended, or bylaws, as amended, of it or any similar instrument binding on it or any order, writ, injunction or decree of any court or governmental authority against it or by which it or any of its properties is bound or any indenture, mortgage or contract or other agreement or instrument to which it is a party or by which it or any of its properties is bound, or constitutes or will constitute a default thereunder or results or will result in the imposition of any lien upon any of its properties; and (vi) there are no pending or, to its knowledge, threatened actions, suits, investigations or proceedings (whether or not purportedly on behalf of it) against or affecting it or any of its property before or by any court or administrative agency which, if adversely determined, (A) would adversely affect the ability of it to perform its obligations under this Agreement or the Deposit Agreement or (B) would call into question or challenge the validity of this Agreement or the Deposit Agreement or the enforceability hereof or thereof in accordance with the terms hereof or thereof, nor is the Escrow Agent in default with respect to any order of any court, governmental authority, arbitration board or administrative agency so as to adversely affect its ability to perform its obligations under this Agreement or the Deposit Agreement. SECTION 6. Representations and Warranties of the Paying Agent. The Paying Agent represents and warrants to Atlas, the Investors, the Escrow Agent and the Pass Through Trustee as follows: (i) it is a Delaware banking company duly organized and validly existing in good standing under the laws of its jurisdiction of incorporation; 10 14 (ii) it has full power, authority and legal right to conduct its business and operations as currently conducted and to enter into and perform its obligations under this Agreement; (iii) the execution, delivery and performance of this Agreement has been duly authorized by all necessary corporate action on the part of it and does not require any stockholder approval, or approval or consent of any trustee or holder of any indebtedness or obligations of it, and such document has been duly executed and delivered by it and constitutes its legal, valid and binding obligations enforceable against it in accordance with the terms hereof except as such enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights generally (regardless of whether such enforceability is considered in a proceeding in equity or at law); (iv) no authorization, consent or approval of or other action by, and no notice to or filing with, any United States federal or state governmental authority or regulatory body is required for the execution, delivery or performance by it of this Agreement; (v) neither the execution, delivery or performance by it of this Agreement, nor compliance with the terms and provisions hereof, conflicts or will conflict with or results or will result in a breach or violation of any of the terms, conditions or provisions of, or will require any consent or approval under, any law, governmental rule or regulation or the charter documents, as amended, or bylaws, as amended, of it or any similar instrument binding on it or any order, writ, injunction or decree of any court or governmental authority against it or by which it or any of its properties is bound or any indenture, mortgage or contract or other agreement or instrument to which it is a party or by which it or any of its properties is bound, or constitutes or will constitute a default thereunder or results or will result in the imposition of any lien upon any of its properties; and (vi) there are no pending or, to its knowledge, threatened actions, suits, investigations or proceedings (whether or not purportedly on behalf of it) against or affecting it or any of its property before or by any court or administrative agency which, if adversely determined, (A) would adversely affect the ability of it to perform its obligations under this Agreement or (B) would call into question or challenge the validity of this Agreement or the enforceability hereof in accordance with the terms hereof, nor is the Paying Agent in default with respect to any order of any court, governmental authority, arbitration board or administrative agency so as to adversely affect its ability to perform its obligations under this Agreement. 11 15 SECTION 7. Indemnification. Except for actions expressly required of the Escrow Agent or the Paying Agent hereunder, each of the Escrow Agent and the Paying Agent shall in all cases be fully justified in failing or refusing to act hereunder unless it shall have been indemnified by the party requesting such action in a manner reasonably satisfactory to it against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. In the event Atlas requests any amendment to any Operative Agreement (as defined in the Note Purchase Agreement), the Pass Through Trustee agrees to pay all reasonable fees and expenses (including, without limitation, fees and disbursements of counsel) of the Escrow Agent and the Paying Agent in connection therewith. SECTION 8. Amendment, Etc. Upon request of the Pass Through Trustee and approval by an Action of Investors, the Escrow Agent shall enter into an amendment to this Agreement, so long as such amendment does not adversely affect the rights or obligations of the Escrow Agent or the Paying Agent, provided that upon request of the Pass Through Trustee and without any consent of the Investors, the Escrow Agent shall enter into an amendment to this Agreement for any of the following purposes: (1) to correct or supplement any provision in this Agreement which may be defective or inconsistent with any other provision herein or to cure any ambiguity or correct any mistake or to modify any other provision with respect to matters or questions arising under this Agreement, provided that any such action shall not materially adversely affect the interests of the Investors; or (2) to comply with any requirement of the SEC, applicable law, rules or regulations of any exchange or quotation system on which the Certificates are listed or any regulatory body; or (3) to evidence and provide for the acceptance of appointment under this Agreement of a successor Escrow Agent, successor Paying Agent or successor Pass Through Trustee. SECTION 9. Notices. Unless otherwise expressly provided herein, any notice or other communication under this Agreement shall be in writing (including by facsimile) and shall be deemed to be given and effective upon receipt thereof. All notices shall be sent to (i) if to the Investors, as their respective names shall appear in the Register; (ii) if to the Escrow Agent, addressed to at its office at: FIRST SECURITY BANK, NATIONAL ASSOCIATION 79 South Main Street Salt Lake City, UT 84111 12 16 Attention: Corporate Trust Department Telecopier: 801-246-5053 (iii) if to the Pass Through Trustee, addressed to it at its office at: WILMINGTON TRUST COMPANY One Rodney Square 1100 N. Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Telecopier: 302-651-8882 (iv) if to the Paying Agent, addressed to it at its office at: WILMINGTON TRUST COMPANY One Rodney Square 1100 N. Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Telecopier: 302-651-8882 (v) in each case with a copy to Atlas, addressed to it at its office at: ATLAS AIR, INC. 538 Commons Drive Golden, CO 80401 Attention: Chief Financial Officer Telecopier: 303-526-5051 (or at such other address as any such party may specify from time to time in a written notice to the other parties). On or prior to the execution of this Agreement, the Pass Through Trustee has delivered to the Escrow Agent a certificate containing specimen signatures of the representatives of the Pass Through Trustee who are authorized to give notices and instructions with respect to this Agreement. The Escrow Agent may conclusively rely on such certificate until the Escrow Agent receives written notice from the Pass Through Trustee to the contrary. SECTION 10. Transfer. No party hereto shall be entitled to assign or otherwise transfer this Agreement (or any interest herein) other than (in the case of the Escrow Agent) to a successor escrow agent under Section 1.06 hereof or (in the case of the Paying Agent) to a successor paying agent under Section 2.04 hereof, and any purported 13 17 assignment in violation thereof shall be void. This Agreement shall be binding upon the parties hereto and their respective successors and (in the case of the Escrow Agent and the Paying Agent) their respective permitted assigns. Upon the occurrence of the Transfer (as defined below) contemplated by the Assignment and Assumption Agreement (as defined below), the Pass Through Trustee shall (without further act) be deemed to have transferred all of its right, title and interest in and to this Agreement to the trustee of the Successor Trust (as defined below) and, thereafter, the trustee of the Successor Trust shall be deemed to be the "Pass Through Trustee" hereunder with the rights and obligations of the "Pass Through Trustee" hereunder and each reference herein to "Atlas Air, Inc. Pass Through Trust "1998-1B-O" shall be deemed to be a reference to "Atlas Air, Inc. Pass Through Trust 1998-1B-S". The parties hereto hereby acknowledge and consent to the Transfer contemplated by the Assignment and Assumption Agreement. As used herein, "Transfer" means the transfers of the assets to the Successor Trust contemplated by the Assignment and Assumption Agreement; "Assignment and Assumption Agreement" means the Assignment and Assumption Agreement to be entered into between the Pass Through Trustee and the trustee of the Successor Trust, substantially in the form of Exhibit E to the Pass Through Trust Agreement; "Successor Trust" means the Atlas Air, Inc. Pass Through Trust 1998-1B-S. SECTION 11. Entire Agreement. This Agreement sets forth all of the promises, covenants, agreements, conditions and understandings among the Escrow Agent, the Paying Agent, the Placement Agents and the Pass Through Trustee with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements and undertakings, inducements or conditions, express or implied, oral or written. SECTION 12. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. SECTION 13. Waiver of Jury Trial Right. EACH OF THE ESCROW AGENT, THE PAYING AGENT, THE INVESTORS AND THE PASS THROUGH TRUSTEE ACKNOWLEDGES AND ACCEPTS THAT IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT SUCH PARTY IRREVOCABLY WAIVES ITS RIGHT TO A TRIAL BY JURY. SECTION 14. Counterparts. This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one instrument. 14 18 IN WITNESS WHEREOF, the Escrow Agent, the Paying Agent, the Placement Agents and the Pass Through Trustee have caused this Escrow and Paying Agent Agreement (Class B) to be duly executed as of the day and year first above written. FIRST SECURITY BANK, NATIONAL ASSOCIATION as Escrow Agent By /s/ C. SCOTT NIELSEN ------------------------------- Name: C. Scott Nielsen Title: Vice President 19 MORGAN STANLEY & CO. INCORPORATED; BT ALEX. BROWN INCORPORATED; DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION; GOLDMAN, SACHS & CO., as Placement Agents By: MORGAN STANLEY & CO. INCORPORATED By /s/ TOM CAHILL ------------------------------- Name: Title: WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as Pass Through Trustee for and on behalf of Atlas Air, Inc. Pass Through Trust 1998-1B-O By /s/ JAMES P. LAWLER ------------------------------- Name: JAMES P. LAWLER Title: Vice President WILMINGTON TRUST COMPANY as Paying Agent By /s/ JAMES P. LAWLER ------------------------------- Name: JAMES P. LAWLER Title: Vice President 20 EXHIBIT A ATLAS AIR, INC. 1998-1B ESCROW RECEIPT No. __ This Escrow Receipt evidences a fractional undivided interest in amounts ("Account Amounts") from time to time deposited into a certain paying agent account (the "Paying Agent Account") described in the Escrow and Paying Agent Agreement (Class B) dated as of February 9, 1998 (as amended, modified or supplemented from time to time, the "Escrow and Paying Agent Agreement") among First Security Bank, National Association, as Escrow Agent (in such capacity, together with its successors in such capacity, the "Escrow Agent"), Morgan Stanley & Co. Incorporated, BT Alex. Brown Incorporated, Donaldson, Lufkin Jenrette Securities Corporation and Goldman, Sachs & Co., as Placement Agents, Wilmington Trust Company as Pass Through Trustee (in such capacity, together with its successors in such capacity, the "Pass Through Trustee") and Wilmington Trust Company, as paying agent (in such capacity, together with its successors in such capacity, the "Paying Agent"). Capitalized terms not defined herein shall have the meanings assigned to them in the Escrow and Paying Agent Agreement. This Escrow Receipt is issued under and is subject to the terms, provisions and conditions of the Escrow and Paying Agent Agreement. By virtue of its acceptance hereof the holder of this Escrow Receipt assents and agrees to be bound by the provisions of the Escrow and Paying Agent Agreement and this Escrow Receipt. This Escrow Receipt represents a fractional undivided interest in amounts deposited from time to time in the Paying Agent Account, and grants or represents no rights, benefits or interests of any kind in respect of any assets or property other than such amounts. This Escrow Receipt evidences the same percentage interest in the Account Amounts as the Fractional Undivided Interest in the Pass Through Trust evidenced by the Certificate to which this Escrow Receipt is affixed. All payments and distributions made to Receiptholders in respect of the Escrow Receipt shall be made only from Account Amounts deposited in the Paying Agent Account. The holder of this Escrow Receipt, by its acceptance of this Escrow Receipt, agrees that it will look solely to the Account Amounts for any payment or distribution due to it pursuant to this Escrow Receipt and that it will not have any recourse to Atlas, the Pass Through Trustee, the Paying Agent or the Escrow Agent, except as expressly provided herein or in the Pass Through Trust Agreement. No Receiptholder of this Escrow Receipt shall have any right to vote or in any manner otherwise control the operation and management of the Paying Agent Account, nor shall anything set forth herein, or contained in the terms of this Escrow Receipt, be construed so as to constitute the Receiptholders from time to time as partners or members of an association. 21 This Escrow Receipt may not be assigned or transferred except in connection with the assignment or transfer of the Certificate to which this Escrow Receipt is affixed. After payment to the holder hereof of its Escrow Interest in the Final Distribution, upon the request of the Pass Through Trustee, the holder hereof will return this Escrow Receipt to the Pass Through Trustee. The Paying Agent may treat the person in whose name the Certificate to which this Escrow Receipt is attached as the owner hereof for all purposes, and the Paying Agent shall not be affected by any notice to the contrary. THIS ESCROW RECEIPT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the Escrow Agent has caused this Escrow Receipt to be duly executed. Dated: ______________, 199_ FIRST SECURITY BANK, NATIONAL ASSOCIATION as Escrow Agent By ------------------------------- Name: Title: 2 22 EXHIBIT B WITHDRAWAL CERTIFICATE (Class B) FIRST SECURITY BANK, NATIONAL ASSOCIATION as Escrow Agent Dear Sirs: Reference is made to the Escrow and Paying Agent Agreement, dated as of February 9, 1998 (the "Agreement"). We hereby certify to you that the conditions to the obligations of the undersigned to execute a Participation Agreement pursuant to the Note Purchase Agreement have been satisfied. Pursuant to Section 1.02(c) of the Agreement, please execute the attached Notice of Withdrawal and immediately transmit by facsimile to the Depositary, at (312) 606-8428, Attention: Claudia Heldring and (312) 904-9106, Attention: Money Market Desk. Very truly yours, WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Pass Through Trustee By ---------------------------------- Name Dated: ____________, 199_ 23 EXHIBIT C PREPAYMENT WITHDRAWAL CERTIFICATE (Class B) FIRST SECURITY BANK, NATIONAL ASSOCIATION as Escrow Agent Dear Sirs: Reference is made to the Escrow and Paying Agent Agreement, dated as of February 9, 1998 (the "Agreement"). Pursuant to Section 1.02(d) of the Agreement, please execute the attached Notice of Withdrawal and immediately transmit by facsimile to the Depositary, at (312) 606-8428, Attention: Claudia Heldring and (312) 904-9106, Attention: Money Market Desk. Very truly yours, WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Pass Through Trustee By ----------------------------------- Name Dated: ____________, 199_ EX-10.102 16 ESCROW & PAYING AGENT AGREEMENT CLASS C 1 EXHIBIT 10.102 EXECUTION COPY ================================================================================ ESCROW AND PAYING AGENT AGREEMENT (Class C) Dated as of February 9, 1998 among FIRST SECURITY BANK, NATIONAL ASSOCIATION as Escrow Agent MORGAN STANLEY & CO. INCORPORATED BT ALEX. BROWN INCORPORATED DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION GOLDMAN, SACHS & CO. as Placement Agents WILMINGTON TRUST COMPANY not in its individual capacity, but solely as Pass Through Trustee for and on behalf of Atlas Air, Inc. Pass Through Trust 1998-1C-O as Pass Through Trustee and WILMINGTON TRUST COMPANY as Paying Agent ================================================================================ 2 TABLE OF CONTENTS
Page ---- SECTION 1. Escrow Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 1.01. Appointment of Escrow Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 1.02. Instruction; Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 1.03. Initial Escrow Amount; Issuance of Escrow Receipts . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 1.04. Payments to Receiptholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 1.05. Mutilated, Destroyed, Lost or Stolen Escrow Receipt . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 1.06. Additional Escrow Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 1.07. Resignation or Removal of Escrow Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 1.08. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 1.09. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 SECTION 2. Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 2.01. Appointment of Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 2.02. Establishment of Paying Agent Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 2.03. Payments from Paying Agent Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 2.04. Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 2.05. Resignation or Removal of Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 2.06. Notice of Final Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 SECTION 3. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 SECTION 4. Other Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 SECTION 5. Representations and Warranties of the Escrow Agent . . . . . . . . . . . . . . . . . . . . . . . . . 9
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Page ---- SECTION 6. Representations and Warranties of the Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . 10 SECTION 7. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 SECTION 8. Amendment, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 SECTION 9. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 SECTION 10. Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 11. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 12. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 13. Waiver of Jury Trial Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 14. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Exhibit A Escrow Receipt Exhibit B Withdrawal Certificate Exhibit C Prepayment Withdrawal Certificate
ii 4 ESCROW AND PAYING AGENT AGREEMENT (Class C) dated as of February 9, 1998 (as amended, modified or supplemented from time to time, this "Agreement") among FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, as Escrow Agent (in such capacity, together with its successors in such capacity, the "Escrow Agent"); MORGAN STANLEY & CO. INCORPORATED, BT ALEX. BROWN INCORPORATED, DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION AND GOLDMAN, SACHS & CO., as Placement Agents of the Certificates referred to below (the "Placement Agents" and together with their respective transferees and assigns as registered owners of the Certificates, the "Investors") under the Placement Agreement referred to below; WILMINGTON TRUST COMPANY, a Delaware banking corporation, not in its individual capacity except as otherwise expressly provided herein, but solely as trustee (in such capacity, together with its successors in such capacity, the "Pass Through Trustee") under the Pass Through Trust Agreement referred to below; and WILMINGTON TRUST COMPANY, a Delaware banking corporation, as paying agent hereunder (in such capacity, together with its successors in such capacity, the "Paying Agent"). W I T N E S S E T H WHEREAS, Atlas Air, Inc. ("Atlas") and the Pass Through Trustee have entered into the Pass Through Trust Agreement, dated as of February 9, 1998 (together, as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Pass Through Trust Agreement") relating to Atlas Air, Inc. Pass Through Trust 1998-1C-O (the "Pass Through Trust") pursuant to which the Atlas Air Pass Through Trust, Series 1998-1C-O Certificates referred to therein (the "Certificates") are being issued; WHEREAS, Atlas and the Placement Agents have entered into a Placement Agreement dated as of January 27, 1998 (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Placement Agreement") pursuant to which the Pass Through Trustee will issue and sell the Certificates to the Placement Agents; WHEREAS, Atlas, the Pass Through Trustee, certain other pass through trustees and certain other persons concurrently herewith are entering into the Note Purchase Agreement, dated as of the date hereof (the "Note Purchase Agreement"), pursuant to which the Pass Through Trustee has agreed to acquire from time to time on or prior to the Cut- Off Date (as defined in the Note Purchase Agreement) equipment notes (the "Equipment Notes") issued to finance the acquisition of aircraft by Atlas, as lessee or as owner, utilizing a portion of the proceeds from the sale of the Certificates (the "Net Proceeds"); WHEREAS, the Placement Agents and the Pass Through Trustee intend that the Net Proceeds be held in escrow by the Escrow Agent on behalf of the Investors, subject to withdrawal upon request by the Pass Through Trustee and satisfaction of the conditions set forth in the Note Purchase Agreement for the purpose of purchasing Equipment Notes, and that pending such withdrawal the Net Proceeds be deposited on behalf of the Escrow Agent 5 with ABN AMRO Bank N.V., a banking institution organized under the laws of the Netherlands, acting through its Chicago Branch, as Depositary (the "Depositary") under the Deposit Agreement, dated as of the date hereof between the Depositary and the Escrow Agent relating to the Pass Through Trust (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Deposit Agreement") pursuant to which, among other things, the Depositary will pay interest for distribution to the Investors and establish accounts from which the Escrow Agent shall make withdrawals upon request of and proper certification by the Pass Through Trustee; WHEREAS, the Escrow Agent wishes to appoint the Paying Agent to pay amounts required to be distributed to the Investors in accordance with this Agreement; and WHEREAS, capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Pass Through Trust Agreement. NOW, THEREFORE, in consideration of the obligations contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1. Escrow Agent. Section 1.01. Appointment of Escrow Agent. Each of the Placement Agents, for and on behalf of each of the Investors, hereby irrevocably appoints, authorizes and directs the Escrow Agent to act as escrow agent and fiduciary hereunder and under the Deposit Agreement for such specific purposes and with such powers as are specifically delegated to the Escrow Agent by the terms of this Agreement, together with such other powers as are reasonably incidental thereto. Any and all money received and held by the Escrow Agent under this Agreement or the Deposit Agreement shall be held in escrow by the Escrow Agent in accordance with the terms of this Agreement. This Agreement is irrevocable and the Investors' rights with respect to any monies received and held in escrow by the Escrow Agent under this Agreement or the Deposit Agreement shall only be as provided under the terms and conditions of this Agreement and the Deposit Agreement. The Escrow Agent (which term as used in this sentence shall include reference to its affiliates and its own and its affiliates' officers, directors, employees and agents): (a) shall have no duties or responsibilities except those expressly set forth in this Agreement; (b) shall not be responsible to the Pass Through Trustee or the Investors for any recitals, statements, representations or warranties of any person other then itself contained in this Agreement or the Deposit Agreement or for the failure by the Pass Through Trustee, the Investors or any other person or entity (other than the Escrow Agent) to perform any of its obligations hereunder (whether or not the Escrow Agent shall have any knowledge thereof); and (c) shall not be responsible for any action taken or omitted to be taken by it hereunder or provided for herein or in connection herewith, except for its own willful misconduct or gross negligence (or simple negligence in connection with the handling of funds). 2 6 Section 1.02. Instruction; Etc. The Placement Agents, for and on behalf of each of the Investors, hereby irrevocably instruct the Escrow Agent, and the Escrow Agent agrees, (a) to enter into the Deposit Agreement, (b) to appoint the Paying Agent as provided in this Agreement, (c) upon receipt at any time and from time to time prior to the Delivery Period Termination Date (as defined in the Note Purchase Agreement) of a certificate substantially in the form of Exhibit B hereto (a "Withdrawal Certificate") executed by the Pass Through Trustee, together with an attached Notice of Purchase Withdrawal in substantially the form of Exhibit A to the Deposit Agreement duly completed by the Pass Through Trustee (the "Applicable Notice of Purchase Withdrawal" and the withdrawal to which it relates, a "Purchase Withdrawal"), immediately to execute the Applicable Notice of Purchase Withdrawal as Escrow Agent and transmit it to the Depositary by facsimile transmission in accordance with the Deposit Agreement; provided that, upon the request of the Pass Through Trustee after such transmission, the Escrow Agent shall cancel such Applicable Notice of Purchase Withdrawal, (d) upon receipt at any time and from time to time prior to the Delivery Period Termination Date (as defined in the Note Purchase Agreement) of a certificate substantially in the form of Exhibit C hereto (a "Prepayment Withdrawal Certificate") executed by the Pass Through Trustee, together with an attached Notice of Prepayment Withdrawal in substantially the form of Exhibit B to the Deposit Agreement duly completed by the Pass Through Trustee (the "Applicable Notice of Prepayment Withdrawal" and the withdrawal to which it relates, a "Prepayment Withdrawal"), immediately to execute the Applicable Notice of Prepayment Withdrawal as Escrow Agent and transmit it to the Depositary by facsimile transmission in accordance with the Deposit Agreement; provided that, upon the request of the Pass Through Trustee after such transmission, the Escrow Agent shall cancel such Applicable Notice of Prepayment Withdrawal, and (e) if there are any undrawn Deposits (as defined in the Deposit Agreement) on the earlier of (i) the Delivery Period Termination Date and (ii) the day on which the Escrow Agent receives notice from the Pass Through Trustee that the Pass Through Trustee's obligation to purchase Equipment Notes under the Note Purchase Agreement has terminated, to give notice to the Depositary (with a copy to the Paying Agent) substantially in the form of Exhibit C to the Deposit Agreement requesting a withdrawal of all of the remaining Deposits, together with accrued and unpaid interest on such Deposits to the date of withdrawal, on the 35th day after the date that such notice of withdrawal is given to the Depositary (or, if not a Business Day, on the next succeeding Business Day) (a "Final Withdrawal"), provided that if the day scheduled for the Final Withdrawal in accordance with the foregoing is within 10 days before or after a Regular Distribution Date, then the Escrow Agent shall request that such requested Final Withdrawal be made on such Regular Distribution Date (the date of such requested withdrawal, the "Final Withdrawal Date"). If for any reason the Escrow Agent shall have failed to give the Final Withdrawal Notice to the Depositary on or before June 29, 1999 (provided, that if a labor strike or work stoppage occurs at The Boeing Company prior to such date, such date shall be extended by adding thereto the number of days that each such labor strike or work stoppage continues in effect), and there are unwithdrawn Deposits on such date, the Final Withdrawal Date shall be deemed to be the Delivery Period Termination Date. 3 7 Section 1.03. Initial Escrow Amount; Issuance of Escrow Receipts. The Escrow Agent hereby directs the Placement Agents to, and the Placement Agents hereby acknowledge that on the date hereof they shall, irrevocably deliver to the Depositary on behalf of the Escrow Agent, an amount in U.S. dollars ("Dollars") and immediately available funds equal to $123,180,000 for deposit on behalf of the Escrow Agent with the Depositary in accordance with Section 2.1 of the Deposit Agreement. The Placement Agents hereby instruct the Escrow Agent, upon receipt of such sum from the Placement Agents, to confirm such receipt by executing and delivering to the Pass Through Trustee an Escrow Receipt in the form of Exhibit A hereto (an "Escrow Receipt"), (a) to be affixed by the Pass Through Trustee to each Certificate and (b) to evidence the same percentage interest (the "Escrow Interest") in the Account Amounts (as defined below) as the Fractional Undivided Interest in the Pass Through Trust evidenced by the Certificate to which it is to be affixed. The Escrow Agent shall provide to the Pass Through Trustee for attachment to each Certificate newly issued under and in accordance with the Pass Through Trust Agreement an executed Escrow Receipt as the Pass Through Trustee may from time to time request of the Escrow Agent. Each Escrow Receipt shall be registered by the Escrow Agent in a register (the "Register") maintained by the Escrow Agent in the same name and same manner as the Certificate to which it is attached and may not thereafter be detached from such Certificate to which it is to be affixed prior to the distribution of the Final Withdrawal (the "Final Distribution"). After the Final Distribution, no additional Escrow Receipts shall be issued and the Pass Through Trustee shall request the return to the Escrow Agent for cancellation of all outstanding Escrow Receipts. Section 1.04. Payments to Receiptholders. All payments and distributions made to holders of an Escrow Receipt (collectively "Receiptholders") in respect of the Escrow Receipt shall be made only from amounts deposited in the Paying Agent Account (as defined below) ("Account Amounts"). Each Receiptholder, by its acceptance of an Escrow Receipt, agrees that (a) it will look solely to the Account Amounts for any payment or distribution due to such Receiptholder pursuant to the terms of the Escrow Receipt and this Agreement and (b) it will have no recourse to Atlas, the Pass Through Trustee, the Paying Agent or the Escrow Agent, except as expressly provided herein or in the Pass Through Trust Agreement. No Receiptholder shall have any right to vote or in any manner otherwise control the operation and management of the Paying Agent Account or the obligations of the parties hereto, nor shall anything set forth herein, or contained in the terms of the Escrow Receipt, be construed so as to constitute the Receiptholders from time to time as partners or members of an association. Section 1.05. Mutilated, Destroyed, Lost or Stolen Escrow Receipt. If (a) any mutilated Escrow Receipt is surrendered to the Escrow Agent or the Escrow Agent receives evidence to its satisfaction of the destruction, loss or theft of any Escrow Receipt and (b) there is delivered to the Escrow Agent and the Pass Through Trustee such security, indemnity or bond, as may be required by them to hold each of them harmless, then, absent notice to the Escrow Agent or the Pass Through Trustee that such destroyed, lost or stolen Escrow Receipt has been acquired by a bona fide purchaser, and provided that the 4 8 requirements of Section 8-405 of the Uniform Commercial Code in effect in any applicable jurisdiction are met, the Escrow Agent shall execute, authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Escrow Receipt, a new Escrow Receipt or Escrow Receipts and of like Escrow Interest in the Account Amounts and bearing a number not contemporaneously outstanding. In connection with the issuance of any new Escrow Receipt under this Section 1.05, the Escrow Agent may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Pass Through Trustee and the Escrow Agent) connected therewith. Any duplicate Escrow Receipt issued pursuant to this Section 1.05 shall constitute conclusive evidence of the appropriate Escrow Interest in the Account Amounts, as if originally issued, whether or not the lost, stolen or destroyed Escrow Receipt shall be found at any time. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Escrow Receipts. Section 1.06. Additional Escrow Amounts. On the date of any Purchase Withdrawal, the Pass Through Trustee may re-deposit with the Depositary some or all of the amounts so withdrawn in accordance with Section 2.4 of the Deposit Agreement. Section 1.07. Resignation or Removal of Escrow Agent. Subject to the appointment and acceptance of a successor Escrow Agent as provided below, the Escrow Agent may resign at any time by giving 30 days' prior written notice thereof to the Investors, but may not otherwise be removed except for cause by the written consent of the Investors with respect to Investors representing Escrow Interests aggregating not less than a majority in interest in the Account Amounts (an "Action of Investors"). Upon any such resignation or removal, the Investors, by an Action of Investors, shall have the right to appoint a successor Escrow Agent. If no successor Escrow Agent shall have been so appointed and shall have accepted such appointment within 30 days after the retiring Escrow Agent's giving of notice of resignation or the removal of the retiring Escrow Agent, then the retiring Escrow Agent may appoint a successor Escrow Agent. Any successor Escrow Agent shall be a bank which has an office in the United States with a combined capital and surplus of at least $100,000,000. Upon the acceptance of any appointment as Escrow Agent hereunder by a successor Escrow Agent, such successor Escrow Agent shall enter into such documents as the Pass Through Trustee shall require and shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Escrow Agent, and the retiring Escrow Agent shall be discharged from its duties and obligations hereunder. No resignation or removal of the Escrow Agent shall be effective unless a written confirmation shall have been obtained from each of Moody's Investors Service, Inc., 5 9 Standard & Poor's Rating Group, a division of McGraw-Hill Inc., and Fitch IBCA, Inc. that the replacement of the Escrow Agent with the successor Escrow Agent will not result in (a) a reduction of the rating for the Certificates below the then current rating for the Certificates or (b) a withdrawal or suspension of the rating of the Certificates. Section 1.08. Persons Deemed Owners. Prior to due presentment of a Certificate for registration of transfer, the Escrow Agent and the Paying Agent may treat the Person in whose name any Escrow Receipt is registered (as of the day of determination) as the owner of such Escrow Receipt for the purpose of receiving distributions pursuant to this Agreement and for all other purposes whatsoever, and neither the Escrow Agent nor the Paying Agent shall be affected by any notice to the contrary. Section 1.09. Further Assurances. The Escrow Agent agrees to take such actions, and execute such other documents, as may be reasonably requested by the Pass Through Trustee in order to effectuate the purposes of this Agreement and the performance by the Escrow Agent of its obligations hereunder. SECTION 2. Paying Agent. Section 2.01. Appointment of Paying Agent. The Escrow Agent hereby irrevocably appoints and authorizes the Paying Agent to act as its paying agent hereunder, for the benefit of the Investors, for such specific purposes and with such powers as are specifically delegated to the Paying Agent by the terms of this Agreement, together with such other powers as are reasonably incidental thereto. Any and all money received and held by the Paying Agent under this Agreement or the Deposit Agreement shall be held in the Paying Agent Account for the benefit of the Investors. The Paying Agent (which term as used in this sentence shall include reference to its affiliates and its own and its affiliates' officers, directors, employees and agents): (a) shall have no duties or responsibilities except those expressly set forth in this Agreement, and shall not by reason of this Agreement be a trustee for the Escrow Agent; (b) shall not be responsible to the Escrow Agent for any recitals, statements, representations or warranties of any person other then itself contained in this Agreement or for the failure by the Escrow Agent or any other person or entity (other than the Paying Agent) to perform any of its obligations hereunder (whether or not the Paying Agent shall have any knowledge thereof); and (c) shall not be responsible for any action taken or omitted to be taken by it hereunder or provided for herein or in connection herewith, except for its own willful misconduct or gross negligence (or simple negligence in connection with the handling of funds). Section 2.02. Establishment of Paying Agent Account. The Paying Agent shall establish a deposit account (the "Paying Agent Account") at Wilmington Trust Company in the name of the Escrow Agent. It is expressly understood by the parties hereto that the Paying Agent is acting as the paying agent of the Escrow Agent hereunder and that no amounts on deposit in the Paying Agent Account constitute part of the Trust Property. 6 10 Section 2.03. Payments from Paying Agent Account. The Escrow Agent hereby irrevocably instructs the Paying Agent, and the Paying Agent agrees to act, as follows: (a) On each Interest Payment Date (as defined in the Deposit Agreement) or as soon thereafter as the Paying Agent has confirmed receipt in the Paying Agent Account from the Depositary of any amount in respect of accrued interest on the Deposits, the Paying Agent shall distribute out of the Paying Agent Account the entire amount deposited therein by the Depositary. There shall be so distributed to each Receiptholder of record on the 15th day (whether or not a Business Day) preceding such Interest Payment Date by check mailed to such Receiptholder, at the address appearing in the Register, such Receiptholder's pro rata share (based on the Escrow Interest in the Account Amounts held by such Receiptholder) of the total amount of interest deposited by the Depositary in the Paying Agent Account on such date, except that, with respect to Escrow Receipts registered on the Record Date in the name of a nominee of the Depository Trust Company ("DTC"), such distribution shall be made by wire transfer in immediately available funds to the account designated by DTC. (b) Upon the confirmation by the Paying Agent of receipt in the Paying Agent Account from the Depositary of any amount in respect of the Final Withdrawal, the Paying Agent shall forthwith distribute the entire amount of the Final Withdrawal deposited therein by the Depositary. There shall be so distributed to each Receiptholder of record on the 15th day (whether or not a Business Day) preceding the Final Withdrawal Date by check mailed to such Receiptholder, at the address appearing in the Register, such Receiptholder's pro rata share (based on the Escrow Interest in the Account Amounts held by such Receiptholder) of the total amount in the Paying Agent Account on account of such Final Withdrawal, except that, with respect to Escrow Receipts registered on the Record Date in the name of a nominee of DTC, such distribution shall be made by wire transfer in immediately available funds to the account designated by DTC. (c) If any payment of interest or principal in respect of the Final Withdrawal is not received by the Paying Agent within five days of the applicable date when due, then it shall be distributed to Receiptholders after actual receipt by the Paying Agent on the same basis as a Special Payment is distributed under the Pass Through Trust Agreement. (d) The Paying Agent shall include with any check mailed pursuant to this Section any notice required to be distributed under the Pass Through Trust Agreement that is furnished to the Paying Agent by the Pass Through Trustee. Section 2.04. Withholding Taxes. The Paying Agent shall exclude and withhold from each distribution of accrued interest on the Deposits (as defined in the Deposit Agreement) and any amount in respect of the Final Withdrawal any and all withholding taxes 7 11 applicable thereto as required by law. The Paying Agent agrees to act as such withholding agent and, in connection therewith, whenever any present or future taxes or similar charges are required to be withheld with respect to any amounts payable in respect of the Deposits (as defined in the Deposit Agreement) or the escrow amounts, to withhold such amounts and timely pay the same to the appropriate authority in the name of and on behalf of the Receiptholders, that it will file any necessary withholding tax returns or statements when due, and that, as promptly as possible after the payment thereof, it will deliver to each such Receiptholder appropriate documentation showing the payment thereof, together with such additional documentary evidence as such Receiptholder may reasonably request from time to time. The Paying Agent agrees to file any other information reports as it may be required to file under United States law. Section 2.05. Resignation or Removal of Paying Agent. Subject to the appointment and acceptance of a successor Paying Agent as provided below, the Paying Agent may resign at any time by giving 30 days' prior written notice thereof to the Escrow Agent, but may not otherwise be removed except for cause by the Escrow Agent. Upon any such resignation or removal, the Escrow Agent shall have the right to appoint a successor Paying Agent. If no successor Paying Agent shall have been so appointed and shall have accepted such appointment within 30 days after the retiring Paying Agent's giving of notice of resignation or the removal of the retiring Paying Agent, then the retiring Paying Agent may appoint a successor Paying Agent. Any Successor Paying Agent shall be a bank which has an office in the United States with a combined capital and surplus of at least $100,000,000. Upon the acceptance of any appointment as Paying Agent hereunder by a successor Paying Agent, such successor Paying Agent shall enter into such documents as the Escrow Agent shall require and shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Paying Agent, and the retiring Paying Agent shall be discharged from its duties and obligations hereunder. Section 2.06. Notice of Final Withdrawal. Promptly after receipt by the Paying Agent of notice that the Escrow Agent has requested a Final Withdrawal or that a Final Withdrawal will be made, the Paying Agent shall cause notice of the distribution of the Final Withdrawal to be mailed to each of the Receiptholders at its address as it appears in the Register. Such notice shall be mailed not less than 15 days prior to the Final Withdrawal Date. Such notice shall set forth: (i) the Final Withdrawal Date and the date for determining Receiptholders of record who shall be entitled to receive distributions in respect of the Final Withdrawal, (ii) the amount of the payment in respect of the Final Withdrawal for each $1,000 face amount Certificate (based on information provided by the Pass Through Trustee) and the amount thereof constituting unused Deposits (as defined in the Deposit Agreement) and interest thereon, and 8 12 (iii) if the Final Withdrawal Date is the same date as a Regular Distribution Date, the total amount to be received on such date for each $1,000 face amount Certificate (based on information provided by the Pass Through Trustee). Such mailing may include any notice required to be given to Certificateholders in connection with such distribution pursuant to the Pass Through Trust Agreement. SECTION 3. Payments. If, notwithstanding the instructions in Section 4 of the Deposit Agreement that all amounts payable to the Escrow Agent under the Deposit Agreement be paid by the Depositary directly to the Paying Agent or the Pass Through Trustee (depending on the circumstances), the Escrow Agent receives any payment thereunder, then the Escrow Agent shall forthwith pay such amount in Dollars and in immediately available funds by wire transfer to (a) in the case of a payment of accrued interest on the Deposits (as defined in the Deposit Agreement) or any Final Withdrawal, directly to the Paying Agent Account and (b) in the case of any Purchase Withdrawal, directly to the Pass Through Trustee or its designee as specified and in the manner provided in the Applicable Notice of Purchase Withdrawal. The Escrow Agent hereby waives any and all rights of set-off, combination of accounts, right of retention or similar right (whether arising under applicable law, contract or otherwise) it may have against amounts payable to the Paying Agent howsoever arising. SECTION 4. Other Actions. The Escrow Agent shall take such other actions under or in respect of the Deposit Agreement (including, without limitation, the enforcement of the obligations of the Depositary thereunder) as the Investors, by an Action of Investors, may from time to time request. SECTION 5. Representations and Warranties of the Escrow Agent. The Escrow Agent represents and warrants to Atlas, the Investors, the Paying Agent and the Pass Through Trustee as follows: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America; (ii) it has full power, authority and legal right to conduct its business and operations as currently conducted and to enter into and perform its obligations under this Agreement and the Deposit Agreement; (iii) the execution, delivery and performance of each of this Agreement and the Deposit Agreement have been duly authorized by all necessary corporate action on the part of it and do not require any stockholder approval, or approval or consent of any trustee or holder of any indebtedness or obligations of it, and each such document has been duly executed and delivered by it and constitutes its legal, valid and binding obligations 9 13 enforceable against it in accordance with the terms hereof or thereof except as such enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights generally (regardless of whether such enforceability is considered in a proceeding in equity or at law); (iv) no authorization, consent or approval of or other action by, and no notice to or filing with, any United States federal or state governmental authority or regulatory body is required for the execution, delivery or performance by it of this Agreement or the Deposit Agreement; (v) neither the execution, delivery or performance by it of this Agreement or the Deposit Agreement, nor compliance with the terms and provisions hereof or thereof, conflicts or will conflict with or results or will result in a breach or violation of any of the terms, conditions or provisions of, or will require any consent or approval under, any law, governmental rule or regulation or the charter documents, as amended, or bylaws, as amended, of it or any similar instrument binding on it or any order, writ, injunction or decree of any court or governmental authority against it or by which it or any of its properties is bound or any indenture, mortgage or contract or other agreement or instrument to which it is a party or by which it or any of its properties is bound, or constitutes or will constitute a default thereunder or results or will result in the imposition of any lien upon any of its properties; and (vi) there are no pending or, to its knowledge, threatened actions, suits, investigations or proceedings (whether or not purportedly on behalf of it) against or affecting it or any of its property before or by any court or administrative agency which, if adversely determined, (A) would adversely affect the ability of it to perform its obligations under this Agreement or the Deposit Agreement or (B) would call into question or challenge the validity of this Agreement or the Deposit Agreement or the enforceability hereof or thereof in accordance with the terms hereof or thereof, nor is the Escrow Agent in default with respect to any order of any court, governmental authority, arbitration board or administrative agency so as to adversely affect its ability to perform its obligations under this Agreement or the Deposit Agreement. SECTION 6. Representations and Warranties of the Paying Agent. The Paying Agent represents and warrants to Atlas, the Investors, the Escrow Agent and the Pass Through Trustee as follows: (i) it is a Delaware banking company duly organized and validly existing in good standing under the laws of its jurisdiction of incorporation; 10 14 (ii) it has full power, authority and legal right to conduct its business and operations as currently conducted and to enter into and perform its obligations under this Agreement; (iii) the execution, delivery and performance of this Agreement has been duly authorized by all necessary corporate action on the part of it and does not require any stockholder approval, or approval or consent of any trustee or holder of any indebtedness or obligations of it, and such document has been duly executed and delivered by it and constitutes its legal, valid and binding obligations enforceable against it in accordance with the terms hereof except as such enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights generally (regardless of whether such enforceability is considered in a proceeding in equity or at law); (iv) no authorization, consent or approval of or other action by, and no notice to or filing with, any United States federal or state governmental authority or regulatory body is required for the execution, delivery or performance by it of this Agreement; (v) neither the execution, delivery or performance by it of this Agreement, nor compliance with the terms and provisions hereof, conflicts or will conflict with or results or will result in a breach or violation of any of the terms, conditions or provisions of, or will require any consent or approval under, any law, governmental rule or regulation or the charter documents, as amended, or bylaws, as amended, of it or any similar instrument binding on it or any order, writ, injunction or decree of any court or governmental authority against it or by which it or any of its properties is bound or any indenture, mortgage or contract or other agreement or instrument to which it is a party or by which it or any of its properties is bound, or constitutes or will constitute a default thereunder or results or will result in the imposition of any lien upon any of its properties; and (vi) there are no pending or, to its knowledge, threatened actions, suits, investigations or proceedings (whether or not purportedly on behalf of it) against or affecting it or any of its property before or by any court or administrative agency which, if adversely determined, (A) would adversely affect the ability of it to perform its obligations under this Agreement or (B) would call into question or challenge the validity of this Agreement or the enforceability hereof in accordance with the terms hereof, nor is the Paying Agent in default with respect to any order of any court, governmental authority, arbitration board or administrative agency so as to adversely affect its ability to perform its obligations under this Agreement. 11 15 SECTION 7. Indemnification. Except for actions expressly required of the Escrow Agent or the Paying Agent hereunder, each of the Escrow Agent and the Paying Agent shall in all cases be fully justified in failing or refusing to act hereunder unless it shall have been indemnified by the party requesting such action in a manner reasonably satisfactory to it against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. In the event Atlas requests any amendment to any Operative Agreement (as defined in the Note Purchase Agreement), the Pass Through Trustee agrees to pay all reasonable fees and expenses (including, without limitation, fees and disbursements of counsel) of the Escrow Agent and the Paying Agent in connection therewith. SECTION 8. Amendment, Etc. Upon request of the Pass Through Trustee and approval by an Action of Investors, the Escrow Agent shall enter into an amendment to this Agreement, so long as such amendment does not adversely affect the rights or obligations of the Escrow Agent or the Paying Agent, provided that upon request of the Pass Through Trustee and without any consent of the Investors, the Escrow Agent shall enter into an amendment to this Agreement for any of the following purposes: (1) to correct or supplement any provision in this Agreement which may be defective or inconsistent with any other provision herein or to cure any ambiguity or correct any mistake or to modify any other provision with respect to matters or questions arising under this Agreement, provided that any such action shall not materially adversely affect the interests of the Investors; or (2) to comply with any requirement of the SEC, applicable law, rules or regulations of any exchange or quotation system on which the Certificates are listed or any regulatory body; or (3) to evidence and provide for the acceptance of appointment under this Agreement of a successor Escrow Agent, successor Paying Agent or successor Pass Through Trustee. SECTION 9. Notices. Unless otherwise expressly provided herein, any notice or other communication under this Agreement shall be in writing (including by facsimile) and shall be deemed to be given and effective upon receipt thereof. All notices shall be sent to (i) if to the Investors, as their respective names shall appear in the Register; (ii) if to the Escrow Agent, addressed to at its office at: FIRST SECURITY BANK, NATIONAL ASSOCIATION 79 South Main Street Salt Lake City, UT 84111 12 16 Attention: Corporate Trust Department Telecopier: 801-246-5053 (iii) if to the Pass Through Trustee, addressed to it at its office at: WILMINGTON TRUST COMPANY One Rodney Square 1100 N. Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Telecopier: 302-651-8882 (iv) if to the Paying Agent, addressed to it at its office at: WILMINGTON TRUST COMPANY One Rodney Square 1100 N. Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Telecopier: 302-651-8882 (v) in each case with a copy to Atlas, addressed to it at its office at: ATLAS AIR, INC. 538 Commons Drive Golden, CO 80401 Attention: Chief Financial Officer Telecopier: 303-526-5051 (or at such other address as any such party may specify from time to time in a written notice to the other parties). On or prior to the execution of this Agreement, the Pass Through Trustee has delivered to the Escrow Agent a certificate containing specimen signatures of the representatives of the Pass Through Trustee who are authorized to give notices and instructions with respect to this Agreement. The Escrow Agent may conclusively rely on such certificate until the Escrow Agent receives written notice from the Pass Through Trustee to the contrary. SECTION 10. Transfer. No party hereto shall be entitled to assign or otherwise transfer this Agreement (or any interest herein) other than (in the case of the Escrow Agent) to a successor escrow agent under Section 1.06 hereof or (in the case of the Paying Agent) to a successor paying agent under Section 2.04 hereof, and any purported 13 17 assignment in violation thereof shall be void. This Agreement shall be binding upon the parties hereto and their respective successors and (in the case of the Escrow Agent and the Paying Agent) their respective permitted assigns. Upon the occurrence of the Transfer (as defined below) contemplated by the Assignment and Assumption Agreement (as defined below), the Pass Through Trustee shall (without further act) be deemed to have transferred all of its right, title and interest in and to this Agreement to the trustee of the Successor Trust (as defined below) and, thereafter, the trustee of the Successor Trust shall be deemed to be the "Pass Through Trustee" hereunder with the rights and obligations of the "Pass Through Trustee" hereunder and each reference herein to "Atlas Air, Inc. Pass Through Trust "1998-1C-O" shall be deemed to be a reference to "Atlas Air, Inc. Pass Through Trust 1998-1C-S". The parties hereto hereby acknowledge and consent to the Transfer contemplated by the Assignment and Assumption Agreement. As used herein, "Transfer" means the transfers of the assets to the Successor Trust contemplated by the Assignment and Assumption Agreement; "Assignment and Assumption Agreement" means the Assignment and Assumption Agreement to be entered into between the Pass Through Trustee and the trustee of the Successor Trust, substantially in the form of Exhibit E to the Pass Through Trust Agreement; "Successor Trust" means the Atlas Air, Inc. Pass Through Trust 1998-1C-S. SECTION 11. Entire Agreement. This Agreement sets forth all of the promises, covenants, agreements, conditions and understandings among the Escrow Agent, the Paying Agent, the Placement Agents and the Pass Through Trustee with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements and undertakings, inducements or conditions, express or implied, oral or written. SECTION 12. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. SECTION 13. Waiver of Jury Trial Right. EACH OF THE ESCROW AGENT, THE PAYING AGENT, THE INVESTORS AND THE PASS THROUGH TRUSTEE ACKNOWLEDGES AND ACCEPTS THAT IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT SUCH PARTY IRREVOCABLY WAIVES ITS RIGHT TO A TRIAL BY JURY. SECTION 14. Counterparts. This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one instrument. 14 18 IN WITNESS WHEREOF, the Escrow Agent, the Paying Agent, the Placement Agents and the Pass Through Trustee have caused this Escrow and Paying Agent Agreement (Class C) to be duly executed as of the day and year first above written. FIRST SECURITY BANK, NATIONAL ASSOCIATION as Escrow Agent By /s/ C. SCOTT NIELSEN ------------------------------- Name: C. Scott Nielsen Title: Vice President 19 MORGAN STANLEY & CO. INCORPORATED; BT ALEX. BROWN INCORPORATED; DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION; GOLDMAN, SACHS & CO., as Placement Agents By: MORGAN STANLEY & CO. INCORPORATED By /s/ TOM CAHILL ------------------------------- Name: Title: WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as Pass Through Trustee for and on behalf of Atlas Air, Inc. Pass Through Trust 1998-1C-O By /s/ JAMES P. LAWLER ------------------------------- Name: JAMES P. LAWLER Title: Vice President WILMINGTON TRUST COMPANY as Paying Agent By /s/ JAMES P. LAWLER ------------------------------- Name: JAMES P. LAWLER Title: Vice President 20 EXHIBIT A ATLAS AIR, INC. 1998-1C ESCROW RECEIPT No. __ This Escrow Receipt evidences a fractional undivided interest in amounts ("Account Amounts") from time to time deposited into a certain paying agent account (the "Paying Agent Account") described in the Escrow and Paying Agent Agreement (Class C) dated as of February 9, 1998 (as amended, modified or supplemented from time to time, the "Escrow and Paying Agent Agreement") among First Security Bank, National Association, as Escrow Agent (in such capacity, together with its successors in such capacity, the "Escrow Agent"), Morgan Stanley & Co. Incorporated, BT Alex. Brown Incorporated, Donaldson, Lufkin Jenrette Securities Corporation and Goldman, Sachs & Co., as Placement Agents, Wilmington Trust Company as Pass Through Trustee (in such capacity, together with its successors in such capacity, the "Pass Through Trustee") and Wilmington Trust Company, as paying agent (in such capacity, together with its successors in such capacity, the "Paying Agent"). Capitalized terms not defined herein shall have the meanings assigned to them in the Escrow and Paying Agent Agreement. This Escrow Receipt is issued under and is subject to the terms, provisions and conditions of the Escrow and Paying Agent Agreement. By virtue of its acceptance hereof the holder of this Escrow Receipt assents and agrees to be bound by the provisions of the Escrow and Paying Agent Agreement and this Escrow Receipt. This Escrow Receipt represents a fractional undivided interest in amounts deposited from time to time in the Paying Agent Account, and grants or represents no rights, benefits or interests of any kind in respect of any assets or property other than such amounts. This Escrow Receipt evidences the same percentage interest in the Account Amounts as the Fractional Undivided Interest in the Pass Through Trust evidenced by the Certificate to which this Escrow Receipt is affixed. All payments and distributions made to Receiptholders in respect of the Escrow Receipt shall be made only from Account Amounts deposited in the Paying Agent Account. The holder of this Escrow Receipt, by its acceptance of this Escrow Receipt, agrees that it will look solely to the Account Amounts for any payment or distribution due to it pursuant to this Escrow Receipt and that it will not have any recourse to Atlas, the Pass Through Trustee, the Paying Agent or the Escrow Agent, except as expressly provided herein or in the Pass Through Trust Agreement. No Receiptholder of this Escrow Receipt shall have any right to vote or in any manner otherwise control the operation and management of the Paying Agent Account, nor shall anything set forth herein, or contained in the terms of this Escrow Receipt, be construed so as to constitute the Receiptholders from time to time as partners or members of an association. 21 This Escrow Receipt may not be assigned or transferred except in connection with the assignment or transfer of the Certificate to which this Escrow Receipt is affixed. After payment to the holder hereof of its Escrow Interest in the Final Distribution, upon the request of the Pass Through Trustee, the holder hereof will return this Escrow Receipt to the Pass Through Trustee. The Paying Agent may treat the person in whose name the Certificate to which this Escrow Receipt is attached as the owner hereof for all purposes, and the Paying Agent shall not be affected by any notice to the contrary. THIS ESCROW RECEIPT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the Escrow Agent has caused this Escrow Receipt to be duly executed. Dated: ______________, 199_ FIRST SECURITY BANK, NATIONAL ASSOCIATION as Escrow Agent By ------------------------------- Name: Title: 2 22 EXHIBIT B WITHDRAWAL CERTIFICATE (Class C) FIRST SECURITY BANK, NATIONAL ASSOCIATION as Escrow Agent Dear Sirs: Reference is made to the Escrow and Paying Agent Agreement, dated as of February 9, 1998 (the "Agreement"). We hereby certify to you that the conditions to the obligations of the undersigned to execute a Participation Agreement pursuant to the Note Purchase Agreement have been satisfied. Pursuant to Section 1.02(c) of the Agreement, please execute the attached Notice of Withdrawal and immediately transmit by facsimile to the Depositary, at (312) 606-8428, Attention: Claudia Heldring and (312) 904-9106, Attention: Money Market Desk. Very truly yours, WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Pass Through Trustee By --------------------------------------- Name Dated: ____________, 199_ 23 EXHIBIT C PREPAYMENT WITHDRAWAL CERTIFICATE (Class C) FIRST SECURITY BANK, NATIONAL ASSOCIATION as Escrow Agent Dear Sirs: Reference is made to the Escrow and Paying Agent Agreement, dated as of February 9, 1998 (the "Agreement"). Pursuant to Section 1.02(d) of the Agreement, please execute the attached Notice of Withdrawal and immediately transmit by facsimile to the Depositary, at (312) 606-8428, Attention: Claudia Heldring and (312) 904-9106, Attention: Money Market Desk. Very truly yours, WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Pass Through Trustee By ------------------------------------ Name Dated: ____________, 199_ EX-10.103 17 REVOLVING CREDIT AGREEMENT 1998-1A 1 EXHIBIT 10.103 EXECUTION COPY - -------------------------------------------------------------------------------- REVOLVING CREDIT AGREEMENT (1998-lA) Dated as of February 9, 1998 between WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Subordination Agent, as agent and trustee for the Atlas Air Pass Through Trust 1998-lA-0, as Borrower and ABN AMRO BANK N.V., CHICAGO BRANCH, as Liquidity Provider - -------------------------------------------------------------------------------- Relating to Atlas Air Pass Through Trust 1998-lA-0 7.38% Atlas Air Pass Through Certificates, Series 1998-lA-0 2 TABLE OF CONTENTS
PAGE ---- ARTICLE I DEFINITIONS Section 1.01. Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE II AMOUNT AND TERMS OF THE COMMITMENT Section 2.01. The Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 2.02. Making the Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 2.03. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 2.04. Reduction or Termination of the Maximum Commitment . . . . . . . . . . . . . . . . . . . . . 10 Section 2.05. Repayments of Interest Advances or the Final Advance . . . . . . . . . . . . . . . . . . . . 11 Section 2.06. Repayments of Provider Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 2.07. Payments to the Liquidity Provider Under the Intercreditor Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 2.08. Book Entries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 2.09. Payments from Available Funds Only . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 2.10. Extension of the Expiry Date; Non-Extension Advance . . . . . . . . . . . . . . . . . . . . 13 ARTICLE III OBLIGATIONS OF THE BORROWER Section 3.01. Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 3.02. Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 3.03. Payments Free of Deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 3.04. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 3.05. Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 3.06. Payment on Non-Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 3.07. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 3.08. Replacement of Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 3.09. Funding Loss Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 3.10. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
i 3 ARTICLE IV CONDITIONS PRECEDENT Section 4.01. Conditions Precedent to Effectiveness of Section 2.01 . . . . . . . . . . . . . . . . . . . . 19 Section 4.02. Conditions Precedent to Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 ARTICLE V COVENANTS Section 5.01. Affirmative Covenants of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Section 5.02. Negative Covenants of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 ARTICLE VI LIQUIDITY EVENTS OF DEFAULT Section 6.01. Liquidity Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 ARTICLE VII MISCELLANEOUS Section 7.01. Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 7.02. Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 7.03. No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Section 7.04. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Section 7.05. Indemnification; Survival of Certain Provisions . . . . . . . . . . . . . . . . . . . . . . . 24 Section 7.06. Liability of the Liquidity Provider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 7.07. Costs, Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 7.08. Binding Effect; Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 7.09. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Section 7.10. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Section 7.11. Submission to Jurisdiction; Waiver of Jury Trial; Waiver of Immunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Section 7.12. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 7.13. Entirety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 7.14. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 7.15. Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 7.16. LIQUIDITY PROVIDER's OBLIGATION TO MAKE ADVANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ii 4 ANNEX I Interest Advance Notice of Borrowing ANNEX II Non-Extension Advance Notice of Borrowing ANNEX III Downgrade Advance Notice of Borrowing ANNEX IV Final Advance Notice of Borrowing ANNEX V Notice of Termination ANNEX VI Notice of Replacement Subordination Agent
iii 5 REVOLVING CREDIT AGREEMENT This REVOLVING CREDIT AGREEMENT dated as of February 9, 1998, between WILMINGTON TRUST COMPANY, a Delaware corporation, not in its individual capacity but solely as Subordination Agent under the Intercreditor Agreement (each as defined below), as agent and trustee for the Class A Trust (as defined below) (the "Borrower"), and ABN AMRO BANK N.V., a bank organized under the laws of the Netherlands, acting through its Chicago Branch ("ABN AMRO" or the "Liquidity Provider"). W I T N E S S E T H: WHEREAS, pursuant to the Class A Trust Agreement (such term and all other capitalized terms used in these recitals having the meanings set forth or referred to in Section 1.01), the Class A Trust is issuing the Class A Certificates; and WHEREAS, the Borrower, in order to support the timely payment of a portion of the interest on the Class A Certificates in accordance with their terms, has requested the Liquidity Provider to enter into this Agreement, providing in part for the Borrower to request in specified circumstances that Advances be made hereunder. NOW, THEREFORE, in consideration of the premises, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.01. Certain Defined Terms. (a) Definitions. As used in this Agreement and unless otherwise expressly indicated, or unless the context clearly requires otherwise, the following capitalized terms shall have the following respective meanings for all purposes of this Agreement: "Additional Cost" has the meaning assigned to such term in Section 3.01. "Advance" means an Interest Advance, a Final Advance, a Provider Advance, an Applied Provider Advance or an Unpaid Advance, as the case may be. "Applicable Liquidity Rate" has the meaning assigned to such term in Section 3.07(h). 6 2 "Applicable Margin" means, (x) with respect to any Unpaid Advance or Applied Provider Advance, 2.25%, (y) with respect to any Unapplied Downgrade Advance, 0.675% and (z) with respect to any Unapplied Non-Extension Advance 0.475%. "Applied Downgrade Advance" has the meaning assigned to such term in Section 2.06(a). "Applied Non-Extension Advance" has the meaning assigned to such term in Section 2.06(a). "Applied Provider Advance" has the meaning assigned to such term in Section 2.06(a). "Assignment and Assumption Agreement" means the Assignment and Assumption to be entered into between the Borrower and the trustee of the Successor Trust, substantially in the form of Exhibit E to the Class A Trust Agreement. "Base Rate" means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to (a) the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or if such rate is not so published for any day that is a Business Day, the average of the quotations for such day for such transactions received by the Liquidity Provider from three Federal funds brokers of recognized standing selected by it, plus (b) one-quarter of one percent (1/4 of 1%). "Base Rate Advance" means an Advance that bears interest at a rate based upon the Base Rate. "Borrower" has the meaning assigned to such term in the recital of parties to this Agreement. "Borrowing" means the making of Advances requested by delivery of a Notice of Borrowing. "Business Day" means any day other than a Saturday or Sunday or a day on which commercial banks are required or authorized to close in Denver, Colorado, Chicago, Illinois, New York, New York or, so long as any Class A Certificate is outstanding, the city and state in which the Class A Trustee, the Borrower or any Loan Trustee maintains its Corporate Trust Office or receives or disburses funds, and, 7 3 if the applicable Business Day relates to any Advance or other amount bearing interest based on the LIBOR Rate, on which dealings are carried on in the London interbank market. "Certificates of Deposit" has the meaning assigned to such term in the Deposit Agreement. "Deposits" has the meaning assigned to such terms in the Deposit Agreement. "Depositary" has the meaning assigned to such term in the Deposit Agreement. "Deposit Agreement" means the Deposit Agreement dated February 9, 1998 between First Security Bank, National Association, as Escrow Agent and ABN AMRO, as Depositary, pertaining to the Class A Certificates, as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof. "Downgrade Advance" means an Advance made pursuant to Section 2.02(c). "Effective Date" has the meaning specified in Section 4.01. The delivery of the certificate of the Liquidity Provider contemplated by Section 4.01(e) shall be conclusive evidence that the Effective Date has occurred. "Excluded Taxes" means (i) taxes imposed on the overall net income of the Liquidity Provider or of its Lending Office by the jurisdiction where such Liquidity Provider's principal office or such Lending Office is located, and (ii) Excluded Withholding Taxes. "Excluded Withholding Taxes" means (i) withholding Taxes imposed by the United States except to the extent that such United States withholding Taxes are imposed as a result of any change in applicable law after the date hereof (excluding from change in applicable law for this purpose a change in an applicable treaty or other change in law affecting the applicability of a treaty), or in the case of a successor Liquidity Provider (including a transferee of an Advance) or Lending Office, after the date on which such successor Liquidity Provider obtains its interest or on which the Lending Office is changed, and (ii) any withholding Taxes imposed by the United States which are imposed or increased as a result of the Liquidity Provider failing to deliver to the Borrower any certificate or document (which certificate or document in the good faith judgment of the Liquidity Provider it is legally entitled to provide) which is reasonably requested by the Borrower to establish that payments under this Agreement are exempt from (or entitled to a reduced rate of) withholding Tax. 8 4 "Expenses" means liabilities, obligations, damages, settlements, penalties, claims, actions, suits, costs, expenses, and disbursements (including, without limitation, reasonable fees and disbursements of legal counsel and costs of investigation), provided that Expenses shall not include any Taxes. "Expiry Date" means February 8, 1999, initially, or any date to which the Expiry Date is extended pursuant to Section 2.10. "Final Advance" means an Advance made pursuant to Section 2.02(d). "Intercreditor Agreement" means the Intercreditor Agreement dated the date hereof, among the Trustees, the Liquidity Provider, the liquidity provider under each Liquidity Facility (other than this Agreement) and the Subordination Agent, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Interest Advance" means an Advance made pursuant to Section 2.02(a). "Interest Period" means, with respect to any LIBOR Advance, each of the following periods: (i) the period beginning on the third Business Day following either (x) the Liquidity Provider's receipt of the Notice of Borrowing for such LIBOR Advance (or, in the case of an Unapplied Downgrade Advance, the period beginning on the Expiry Date) or (y) the withdrawal of funds from the Class A Cash Collateral Account for the purpose of paying interest on the Class A Certificates as contemplated by Section 2.06(a) hereof and, in either case, ending on the next Regular Distribution Date (or ending, in the case of an Interest Period applicable to any Unapplied Provider Advance, on the numerically corresponding day in the first or sixth calendar month after the first day of the applicable Interest Period and/or on the next Regular Distribution Date, as Atlas may select by providing notice thereof to the Borrower and the Liquidity Provider no later than three Business Days prior to the commencement of such Interest Period, provided that if Atlas shall not provide such a notice at least three Business Days prior to the commencement of such Interest Period, then Atlas shall be deemed to have selected an Interest Period ending on the next Regular Distribution Date); and (ii) each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the next Regular Distribution 9 5 Date (or ending, in the case of an Interest Period applicable to any Unapplied Provider Advance, on the numerically corresponding day in the first or sixth calendar month after the first day of the applicable Interest Period and/or on the next Regular Distribution Date, as Atlas may select by providing notice thereof to the Borrower and the Liquidity Provider no later than three Business Days prior to the commencement of such Interest Period, provided that if Atlas shall not provide such a notice at least three Business Days prior to the commencement of such Interest Period, then Atlas shall be deemed to have selected an Interest Period ending on the next Regular Distribution Date); provided, however, that (I) if an Unapplied Provider Advance which is a LIBOR Advance becomes an Applied Provider Advance, the Interest Period then applicable to such Unapplied Provider Advance shall be applicable to such Applied Provider Advance and (II) if (x) the Final Advance shall have been made, or (y) other outstanding Advances shall have been converted into the Final Advance, then the Interest Periods shall be successive periods of one month beginning on the third Business Day following the Liquidity Provider's receipt of the Notice of Borrowing for such Final Advance (in the case of clause (x) above) or the Regular Distribution Date following such conversion (in the case of clause (y) above). "Leased Aircraft Participation Agreement" means a participation agreement substantially in the form of Exhibit A-1 to the Note Purchase Agreement. "Lending Office" means the lending office of the Liquidity Provider presently located at Chicago, Illinois, or such other lending office as the Liquidity Provider from time to time shall notify the Borrower as its lending office hereunder; provided that the Liquidity Provider shall not change its Lending Office to a Lending Office outside the United States of America except in accordance with Section 3.01, 3.02 or 3.03 hereof. "LIBOR Advance" means an Advance bearing interest at a rate based upon the LIBOR Rate. "LIBOR Rate" means, with respect to any Interest Period, the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the rates per annum at which deposits in dollars are offered to major banks in the London interbank market at approximately 11:00 A.M. (London time) two Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Advance to which such Interest Period is to apply and for a period of time comparable to such Interest Period. 10 6 "Liquidity Event of Default" means the occurrence of either (a) the acceleration of all of the Equipment Notes or (b) an Atlas Bankruptcy Event. "Liquidity Indemnitee" means (i) the Liquidity Provider, (ii) the directors, officers, employees and agents of the Liquidity Provider, and (iii) the successors and permitted assigns of the persons described in clauses (i) and (ii), inclusive. "Liquidity Provider" has the meaning assigned to such term in the recital of parties to this Agreement. "Maximum Commitment" shall mean, subject to the proviso contained in the third sentence of Section 2.02(a), at any time of determination, (a) the Required Amount at such time less (b) the aggregate amount of each Interest Advance outstanding at such time; provided that following a Provider Advance or a Final Advance, the Maximum Commitment shall be zero. "Non-Extension Advance" means an Advance made pursuant to Section 2.02(b). "Notice of Borrowing" has the meaning specified in Section 2.02(e). "Notice of Replacement Subordination Agent" has the meaning specified in Section 3.08. "Offering Memorandum" means the Offering Memorandum dated January 27, 1998 relating to the Certificates, as such Offering Memorandum may be amended or supplemented. "Owned Aircraft Participation Agreement" means a participation agreement substantially in the form of Exhibit C-1 to the Note Purchase Agreement. "Participation Agreements" means, collectively, the Leased Aircraft Participation Agreement and the Owned Aircraft Participation Agreement. "Performing Note Deficiency" means any time that less than 65% of the then aggregate outstanding principal amount of all Equipment Notes are Performing Equipment Notes. "Provider Advance" means a Downgrade Advance or a Non-Extension Advance. "Regulatory Change" has the meaning assigned to such term in section 3.01. 11 7 "Replenishment Amount" has the meaning assigned to such term in Section 2.06(b). "Required Amount" means, for any day, the sum of the aggregate amount of interest, calculated at the rate per annum equal to the Stated Interest Rate for the Class A Certificates, that would be payable on the Class A Certificates on each of the three successive semiannual Regular Distribution Dates immediately following such day or, if such day is a Regular Distribution Date, on such day and the succeeding two semiannual Regular Distribution Dates, in each case calculated on the basis of the Pool Balance of the Class A Certificates on such day and without regard to expected future payments of principal on the Class A Certificates. "Successor Trust" means Atlas Air Pass Through Trust 1998-lA-S. "Tax Letter" means the letter dated the date hereof between the Liquidity Provider and Atlas pertaining to this Agreement. "Termination Date" means the earliest to occur of the following: (i) the Expiry Date; (ii) the date on which the Borrower delivers to the Liquidity Provider a certificate, signed by a Responsible Officer of the Borrower, certifying that all of the Class A Certificates have been paid in full (or provision has been made for such payment in accordance with the Intercreditor Agreement and the Trust Agreements) or are otherwise no longer entitled to the benefits of this Agreement; (iii) the date on which the Borrower delivers to the Liquidity Provider a certificate, signed by a Responsible Officer of the Borrower, certifying that a Replacement Liquidity Facility has been substituted for this Agreement in full pursuant to Section 3.6(e) of the Intercreditor Agreement; (iv) the fifth Business Day following the receipt by the Borrower of a Termination Notice from the Liquidity Provider pursuant to Section 6.01 hereof; and (v) the date on which no Advance is or may (including by reason of reinstatement as herein provided) become available for a Borrowing hereunder. "Termination Notice" means the Notice of Termination substantially in the form of Annex V to this Agreement. "Transferee" has the meaning assigned to such term in Section 7.08(b). "Unapplied Downgrade Advance" means any Downgrade Advance other than an Applied Downgrade Advance. "Unapplied Provider Advance" means any Provider Advance other than an Applied Provider Advance. 12 8 "Unpaid Advance" has the meaning assigned to such term in Section 2.05. (b) Terms Defined in the Intercreditor Agreement. For all purposes of this Agreement, the following terms shall have the respective meanings assigned to such terms in the Intercreditor Agreement: "ABN AMRO Fee Letter", "Atlas", "Atlas Bankruptcy Event", "Certificates", "Class A Cash Collateral Account", "Class A Certificates", "Class A Certificateholders", "Class A Trust", "Class A Trust Agreement", "Class A Trustee", "Class B Certificates", "Class C Certificates", "Closing Date", "Controlling Party", "Corporate Trust Office", "Distribution Date", "Downgraded Facility", "Equipment Notes", "Final Maturity Date", "Financing Agreement", "Indenture", "Interest Payment Date", "Investment Earnings", "Liquidity Facility", "Liquidity Obligations", "Loan Trustee", "Moody's", "Non-Extended Facility", "Note Purchase Agreement", "Operative Agreements", "Performing Equipment Note", "Person", "Placement Agents", "Placement Agreement", "Pool Balance", "Rating Agency", "Ratings Confirmation", "Regular Distribution Date", "Replacement Liquidity Facility", "Responsible Officer", "Scheduled Payment", "Special Payment", "Standard & Poor's", "Stated Interest Rate", "Subordination Agent", "Taxes", "Threshold Rating", "Transfer", "Trust Agreements", "Trustee" and "Written Notice". ARTICLE II AMOUNT AND TERMS OF THE COMMITMENT Section 2.01. The Advances. The Liquidity Provider hereby irrevocably agrees, on the terms and conditions hereinafter set forth, to make Advances to the Borrower from time to time on any Business Day during the period from the Effective Date until 12:00 Noon (New York City time) on the Expiry Date (unless the obligations of the Liquidity Provider shall be earlier terminated in accordance with the terms of Section 2.04(b)) in an aggregate amount at any time outstanding not to exceed the Maximum Commitment. Section 2.02. Making the Advances. (a) Interest Advances shall be made in one or more Borrowings by delivery to the Liquidity Provider of one or more written and completed Notices of Borrowing in substantially the form of Annex I attached hereto, signed by a Responsible Officer of the Borrower, in an amount not exceeding the Maximum Commitment at such time and shall be used solely for the payment when due of the interest on the Class A Certificates at the Stated Interest Rate therefor in accordance with Section 3.6(a) of the Intercreditor Agreement. Each Interest Advance made hereunder shall 13 9 automatically reduce the Maximum Commitment and the amount available to be borrowed hereunder by subsequent Advances by the amount of such Interest Advance (subject to reinstatement as provided in the next sentence). Upon repayment to the Liquidity Provider in full of the amount of any Interest Advance made pursuant to this Section 2.02(a), together with accrued interest thereon (as provided herein), the Maximum Commitment shall be reinstated by the amount of such repaid Interest Advance; provided, however, that the Maximum Commitment shall not be so reinstated at any time if (i) a Liquidity Event of Default shall have occurred and be continuing and (ii) there is a Performing Note Deficiency. (b) A Non-Extension Advance shall be made in a single Borrowing if this Agreement is not extended in accordance with Section 3.6(d) of the Intercreditor Agreement (unless a Replacement Liquidity Facility to replace this Agreement shall have been delivered to the Borrower as contemplated by said Section 3.6(d) within the time period specified in such Section by delivery to the Liquidity Provider of a written and completed Notice of Borrowing in substantially the form of Annex II attached hereto, signed by a Responsible Officer of the Borrower, in an amount equal to the Maximum Commitment at such time, and shall be used to fund the Class A Cash Collateral Account in accordance with said Section 3.6(d) and Section 3.6(f) of the Intercreditor Agreement. (c) A Downgrade Advance shall be made in a single Borrowing upon a downgrading of the Liquidity Provider's short-term unsecured debt rating issued by either Rating Agency below the applicable Threshold Rating (as provided for in Section 3.6(c) of the Intercreditor Agreement) unless a Replacement Liquidity Facility to replace this Agreement shall have been previously delivered to the Borrower in accordance with said Section 3.6(c), by delivery to the Liquidity Provider of a written and completed Notice of Borrowing in substantially the form of Annex III attached hereto, signed by a Responsible Officer of the Borrower, in an amount equal to the Maximum Commitment at such time, and shall be used to fund the Class A Cash Collateral Account in accordance with said Section 3.6(c) and Section 3.6(f) of the Intercreditor Agreement. (d) A Final Advance shall be made in a single Borrowing upon the receipt by the Borrower of a Termination Notice from the Liquidity Provider pursuant to Section 6.01 hereof by delivery to the Liquidity Provider of a written and completed Notice of Borrowing in substantially the form of Annex IV attached hereto, signed by a Responsible Officer of the Borrower, in an amount equal to the Maximum Commitment at such time, and shall be used to fund the Class A Cash Collateral Account (in accordance with Section 3.6(i) of the Intercreditor Agreement) and Section 3.6(f) of the Intercreditor Agreement. (e) Each Borrowing shall be made on notice in writing (a "Notice of Borrowing") in substantially the form required by Section 2.02(a), 2.02(b), 2.02(c) or 2.02(d), as the case may be, given by the Borrower to the Liquidity Provider. If a Notice of Borrowing is delivered by the Borrower in respect of any Borrowing no later than 12:00 14 10 Noon (New York City time) on a Business Day, upon satisfaction of the conditions precedent set forth in Section 4.02 with respect to a requested Borrowing, the Liquidity Provider shall make available to the Borrower, in accordance with its payment instructions, the amount of such Borrowing in U.S. dollars and immediately available funds, before 12:00 Noon (New York City time) on the first Business Day next following the day of receipt of such Notice of Borrowing or on such later Business Day specified in such Notice of Borrowing. If a Notice of Borrowing is delivered by the Borrower in respect of any Borrowing after 12:00 Noon (New York City time) on a Business Day, upon satisfaction of the conditions precedent set forth in Section 4.02 with respect to a requested Borrowing, the Liquidity Provider shall make available to the Borrower, in accordance with its payment instructions, the amount of such Borrowing in U.S. dollars and immediately available funds, before 12:00 Noon (New York City time) on the second Business Day next following the day of receipt of such Notice of Borrowing or on such later Business Day specified by the Borrower in such Notice of Borrowing. Payments of proceeds of a Borrowing shall be made by wire transfer of immediately available funds to the Borrower in accordance with such wire transfer instructions as the Borrower shall furnish from time to time to the Liquidity Provider for such purpose. Each Notice of Borrowing shall be irrevocable and binding on the Borrower. (f) Upon the making of any Advance requested pursuant to a Notice of Borrowing, in accordance with the Borrower's payment instructions, the Liquidity Provider shall be fully discharged of its obligation hereunder with respect to such Notice of Borrowing, and the Liquidity Provider shall not thereafter be obligated to make any further Advances hereunder in respect of such Notice of Borrowing to the Borrower or to any other Person. Following the making of any Advance pursuant to Section 2.02(b), (c) or (d) hereof to fund the Class A Cash Collateral Account, the Liquidity Provider shall have no interest in or rights to the Class A Cash Collateral Account, such Advance or any other amounts from time to time on deposit in the Class A Cash Collateral Account; provided that the foregoing shall not affect or impair the obligations of the Subordination Agent to make the distributions contemplated by Section 3.6(e) or (f) of the Intercreditor Agreement. By paying to the Borrower proceeds of Advances requested by the Borrower in accordance with the provisions of this Agreement, the Liquidity Provider makes no representation as to, and assumes no responsibility for, the correctness or sufficiency for any purpose of the amount of the Advances so made and requested. Section 2.03. Fees. The Borrower agrees to pay to the Liquidity Provider the fees set forth in the ABN AMRO Fee Letter. Section 2.04. Reduction or Termination of the Maximum Commitment. (a) Automatic Reduction. Promptly following each date on which the Required Amount is reduced as a result of a reduction in the Pool Balance of the Class A Certificates or otherwise, the Maximum Commitment shall automatically be reduced to an amount equal to such reduced Required Amount (as calculated by the Borrower). The Borrower shall give 15 11 notice of any such automatic reduction of the Maximum Commitment to the Liquidity Provider within two Business Days thereof. The failure by the Borrower to furnish any such notice shall not affect such automatic reduction of the Maximum Commitment. (b) Termination. Upon the making of any Provider Advance or Final Advance hereunder or the occurrence of the Termination Date, the obligation of the Liquidity Provider to make further Advances hereunder shall automatically and irrevocably terminate, and the Borrower shall not be entitled to request any further Borrowing hereunder. Section 2.05. Repayments of Interest Advances or the Final Advance. Subject to Sections 2.06, 2.07 and 2.09 hereof, the Borrower hereby agrees, without notice of an Advance or demand for repayment from the Liquidity Provider (which notice and demand are hereby waived by the Borrower), to pay, or to cause to be paid, to the Liquidity Provider on each date on which the Liquidity Provider shall make an Interest Advance or the Final Advance, an amount equal to (a) the amount of such Advance (any such Advance, until repaid, is referred to herein as an "Unpaid Advance"), plus (b) interest on the amount of each such Unpaid Advance as provided in Section 3.07 hereof; provided that if (i) the Liquidity Provider shall make a Provider Advance at any time after making one or more Interest Advances which shall not have been repaid in accordance with this Section 2.05 or (ii) this Liquidity Facility shall become a Downgraded Facility or Non-Extended Facility at any time when unreimbursed Interest Advances have reduced the Maximum Commitment to zero, then such Interest Advances shall cease to constitute Unpaid Advances and shall be deemed to have been changed into an Applied Downgrade Advance or an Applied Non-Extension Advance, as the case may be, for all purposes of this Agreement (including, without limitation, for the purpose of determining when such Interest Advance is required to be repaid to the Liquidity Provider in accordance with Section 2.06 and for the purposes of Section 2.06(b)). The Borrower and the Liquidity Provider agree that the repayment in full of each Interest Advance and Final Advance on the date such Advance is made is intended to be a contemporaneous exchange for new value given to the Borrower by the Liquidity Provider. Section 2.06. Repayments of Provider Advances. (a) Amounts advanced hereunder in respect of a Provider Advance shall be deposited in the Class A Cash Collateral Account, invested and withdrawn from the Class A Cash Collateral Account as set forth in Sections 3.6(c), (d) and (f) of the Intercreditor Agreement. The Borrower agrees to pay to the Liquidity Provider, on each Regular Distribution Date, commencing on the first Regular Distribution Date after the making of a Provider Advance, interest on the principal amount of any such Provider Advance as provided in Section 3.07; provided, however, that amounts in respect of a Provider Advance withdrawn from the Class A Cash Collateral Account for the purpose of paying interest on the Class A Certificates in accordance with Section 3.6(f) of the Intercreditor Agreement (the amount of any such withdrawal being (y) in the case of a Downgrade Advance, an "Applied Downgrade Advance" and (z) in the case of a Non-Extension Advance, an "Applied Non-Extension Advance" and, together with an Applied 16 12 Downgrade Advance, an "Applied Provider Advance") shall thereafter (subject to Section 2.06(b)) be treated as an Interest Advance under this Agreement for purposes of determining the Applicable Liquidity Rate for interest payable thereon; provided further, however, that if, following the making of a Provider Advance, the Liquidity Provider delivers a Termination Notice to the Borrower pursuant to Section 6.01 hereof, such Provider Advance shall thereafter be treated as a Final Advance under this Agreement for purposes of determining the Applicable Liquidity Rate for interest payable thereon. Subject to Sections 2.07 and 2.09 hereof, immediately upon the withdrawal of any amounts from the Class A Cash Collateral Account on account of a reduction in the Required Amount, the Borrower shall repay to the Liquidity Provider a portion of the Provider Advances in a principal amount equal to such reduction, plus interest on the principal amount prepaid as provided in Section 3.07 hereof. (b) At any time when an Applied Provider Advance (or any portion thereof) is outstanding, upon the deposit in the Class A Cash Collateral Account of any amount pursuant to clause "third" of Section 2.4(b) of the Intercreditor Agreement, clause "third" of Section 3.2 of the Intercreditor Agreement or clause "fourth" of Section 3.3 of the Intercreditor Agreement (any such amount being a "Replenishment Amount") for the purpose of replenishing or increasing the balance thereof up to the Required Amount at such time, (i) the aggregate outstanding principal amount of all Applied Provider Advances (and of Provider Advances treated as an Interest Advance for purposes of determining the Applicable Liquidity Rate for interest payable thereon) shall be automatically reduced by the amount of such Replenishment Amount and (ii) the aggregate outstanding principal amount of all Unapplied Provider Advances shall be automatically increased by the amount of such Replenishment Amount. (c) Upon the provision of a Replacement Liquidity Facility in replacement of this Agreement in accordance with Section 3.6(e) of the Intercreditor Agreement, amounts remaining on deposit in the Class A Cash Collateral Account after giving effect to any Applied Provider Advance on the date of such replacement shall be reimbursed to the Liquidity Provider, but only to the extent such amounts are necessary to repay in full to the Liquidity Provider all amounts owing to it hereunder. Section 2.07. Payments to the Liquidity Provider Under the Intercreditor Agreement. In order to provide for payment or repayment to the Liquidity Provider of any amounts hereunder, the Intercreditor Agreement provides that amounts available and referred to in Articles II and III of the Intercreditor Agreement, to the extent payable to the Liquidity Provider pursuant to the terms of the Intercreditor Agreement (including, without limitation, Section 3.6(f) of the Intercreditor Agreement), shall be paid to the Liquidity Provider in accordance with the terms thereof. Amounts so paid to the Liquidity Provider shall be applied by the Liquidity Provider to Liquidity Obligations then due and payable in accordance with the Intercreditor Agreement or, if not provided for in the Intercreditor Agreement, then in such manner as the Liquidity Provider shall deem appropriate. 17 13 Section 2.08. Book Entries. The Liquidity Provider shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower resulting from Advances made from time to time and the amounts of principal and interest payable hereunder and paid from time to time in respect thereof; provided, however, that the failure by the Liquidity Provider to maintain such account or accounts shall not affect the obligations of the Borrower in respect of Advances. Section 2.09. Payments from Available Funds Only. All payments to be made by the Borrower under this Agreement shall be made only from the amounts that constitute Scheduled Payments, Special Payments or payments under Section 8.1 or 9.1, as the case may be, of the Participation Agreements and Section 6 of the Note Purchase Agreement and only to the extent that the Borrower shall have sufficient income or proceeds therefrom to enable the Borrower to make payments in accordance with the terms hereof after giving effect to the priority of payments provisions set forth in the Intercreditor Agreement. The Liquidity Provider agrees that it will look solely to such amounts to the extent available for distribution to it as provided in the Intercreditor Agreement and this Agreement and that the Borrower, in its individual capacity, is not personally liable to it for any amounts payable or liability under this Agreement except as expressly provided in this Agreement, the Intercreditor Agreement or any Participation Agreement. Amounts on deposit in the Class A Cash Collateral Account shall be available to the Borrower to make payments under this Agreement only to the extent and for the purposes expressly contemplated in Section 3.6(f) of the Intercreditor Agreement. Section 2.10. Extension of the Expiry Date: Non-Extension Advance. No earlier than the 60th day and no later than the 40th day prior to the then effective Expiry Date (unless such Expiry Date is on or after the date that is 15 days after the Final Maturity Date for the Class A Certificates), the Borrower shall request that the Liquidity Provider extend the Expiry Date for a period of 364 days after the then effective Expiry Date (unless the obligations of the Liquidity Provider are earlier terminated in accordance with the terms hereof). The Liquidity Provider shall advise the Borrower, no earlier than 40 days and no later than 25 days prior to the then effective Expiry Date, whether, in its sole discretion, it agrees to so extend the Expiry Date. If the Liquidity Provider advises the Borrower on or before the 25th day prior to the Expiry Date then in effect that such Expiry Date shall not be so extended, or fails to irrevocably and unconditionally advise the Borrower on or before the 25th day prior to the Expiry Date then in effect that such Expiry Date shall be so extended (and, in each case, if the Liquidity Provider shall not have been replaced in accordance with Section 3.6(e) of the Intercreditor Agreement), the Borrower shall be entitled on and after such 25th day (but prior to the then effective Expiry Date) to request a Non-Extension Advance in accordance with Section 2.02(b) hereof and Section 3.6(d) of the Intercreditor Agreement. 18 14 ARTICLE III OBLIGATIONS OF THE BORROWER Section 3.01. Increased Costs. The Borrower shall pay to the Liquidity Provider from time to time such amounts as may be necessary to compensate the Liquidity Provider for any increased costs incurred by the Liquidity Provider which are attributable to its making or maintaining any LIBOR Advances hereunder or its obligation to make any such Advances hereunder, or any reduction in any amount receivable by the Liquidity Provider under this Agreement or the Intercreditor Agreement in respect of any such Advances or such obligation (such increases in costs and reductions in amounts receivable being herein called "Additional Costs"), resulting from any change after the date of this Agreement in U.S. federal, state, municipal, or foreign laws or regulations (including Regulation D of the Board of Governors of the Federal Reserve System), or the adoption or making after the date of this Agreement of any interpretations, directives, or requirements applying to a class of banks including the Liquidity Provider under any U.S. federal, state, municipal, or any foreign laws or regulations (whether or not having the force of law) by any court, central bank or monetary authority charged with the interpretation or administration thereof (a "Regulatory Change"), which: (1) changes the basis of taxation of any amounts payable to the Liquidity Provider under this Agreement in respect of any such Advances (other than Excluded Taxes); or (2) imposes or modifies any reserve, special deposit, compulsory loan or similar requirements relating to any extensions of credit or other assets of, or any deposits with other liabilities of, the Liquidity Provider (including any such Advances or any deposits referred to in the definition of LIBOR Rate or related definitions). The Liquidity Provider agrees to use reasonable efforts (consistent with applicable legal and regulatory restrictions) to change the jurisdiction of its Lending Office if making such change would avoid the need for, or reduce the amount of, any amount payable under this Section that may thereafter accrue and would not, in the reasonable judgment of the Liquidity Provider, be otherwise disadvantageous to the Liquidity Provider. The Liquidity Provider will notify the Borrower of any event occurring after the date of this Agreement that will entitle the Liquidity Provider to compensation pursuant to this Section 3.01 as promptly as practicable after it obtains knowledge thereof and determines to request such compensation, which notice shall describe in reasonable detail the calculation of the amounts owed under this Section. Determinations by the Liquidity Provider for purposes of this Section 3.01 of the effect of any Regulatory Change on its costs of making or maintaining Advances or on amounts receivable by it in respect of Advances, and of the additional amounts required to compensate the Liquidity Provider in respect of any Additional Costs, shall be prima facie evidence of the amount owed under this Section. Section 3.02. Capital Adequacy. If (1) the adoption, after the date hereof, of any applicable governmental law, rule or regulation regarding capital adequacy, (2) any 19 15 change, after the date hereof, in the interpretation or administration of any such law, rule or regulation by any central bank or other governmental authority charged with the interpretation or administration thereof or (3) compliance by the Liquidity Provider or any corporation controlling the Liquidity Provider with any applicable guideline or request of general applicability, issued after the date hereof, by any central bank or other governmental authority (whether or not having the force of law) that constitutes a change of the nature described in clause (2), has the effect of requiring an increase in the amount of capital required to be maintained by the Liquidity Provider or any corporation controlling the Liquidity Provider, and such increase is based upon the Liquidity Provider's obligations hereunder and other similar obligations, the Borrower shall pay to the Liquidity Provider from time to time such additional amount or amounts as are necessary to compensate the Liquidity Provider for such portion of such increase as shall be reasonably allocable to the Liquidity Provider's obligations to the Borrower hereunder. The Liquidity Provider agrees to use reasonable efforts (consistent with applicable legal and regulatory restrictions) to change the jurisdiction of its Lending Office if making such change would avoid the need for, or reduce the amount of, any amount payable under this Section that may thereafter accrue and would not, in the reasonable judgment of the Liquidity Provider, be otherwise materially disadvantageous to the Liquidity Provider. The Liquidity Provider will notify the Borrower of any event occurring after the date of this Agreement that will entitle the Liquidity Provider to compensation pursuant to this Section 3.02 as promptly as practicable after it obtains knowledge thereof and determines to request such compensation, which notice shall describe in reasonable detail the calculation of the amounts owed under this Section. Determinations by the Liquidity Provider for purposes of this Section 3.02 of the effect of any increase in the amount of capital required to be maintained by the bank and of the amount allocable to the Liquidity Provider's obligations to the Borrower hereunder shall be prima facie evidence of the amounts owed under this Section. Section 3.03. Payments Free of Deductions. All payments made by the Borrower under this Agreement shall be made free and clear of, and without reduction for or on account of, any present or future stamp or other taxes, levies, imposts, duties, charges, fees, deductions, withholdings, restrictions or conditions of any nature whatsoever now or hereafter imposed, levied, collected, withheld or assessed, excluding Excluded Taxes (such non-excluded taxes being referred to herein, collectively, as "Non-Excluded Taxes" and, individually, as a "Non-Excluded Tax"). If any Non-Excluded Taxes are required to be withheld from any amounts payable to the Liquidity Provider under this Agreement, the amounts so payable to the Liquidity Provider shall be increased to the extent necessary to yield to the Liquidity Provider (after payment of all Non-Excluded Taxes) interest or any other such amounts payable under this Agreement at the rates or in the amounts specified in this Agreement. The Liquidity Provider agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Lending 20 16 Office if making such change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the reasonable judgment of the Liquidity Provider, be otherwise disadvantageous to the Liquidity Provider. From time to time upon the reasonable request of the Borrower, the Liquidity Provider agrees to provide to the Borrower two original Internal Revenue Service Forms 1001 or 4224, as appropriate, or any successor or other form prescribed by the Internal Revenue Service, certifying that the Liquidity Provider is exempt from or entitled to a reduced rate of United States withholding tax on payments pursuant to this Agreement. (b) All payments (including, without limitation, Advances) made by the Liquidity Provider under this Agreement shall be made free and clear of, and without reduction for or on account of, any Taxes. If any Taxes are required to be withheld or deducted from any amounts payable to the Borrower under this Agreement, the Liquidity Provider shall (i) within the time prescribed therefor by applicable law pay to the appropriate governmental or taxing authority the full amount of any such Taxes (and any additional Taxes in respect of the payment required under clause (ii) hereof) and make such reports or returns in connection therewith at the time or times and in the manner prescribed by applicable law, and (ii) pay to the Borrower an additional amount which (after deduction of all such Taxes) will be sufficient to yield to the Borrower the full amount which would have been received by it had no such withholding or deduction been made. Within 30 days after the date of each payment hereunder, the Liquidity Provider shall furnish to the Borrower the original or a certified copy of (or other documentary evidence of) the payment of the Taxes applicable to such payment. Section 3.04. Payments. The Borrower shall make or cause to be made each payment to the Liquidity Provider under this Agreement so as to cause the same to be received by the Liquidity Provider not later than 1:00 P.M. (New York City time) on the day when due. The Borrower shall make all such payments in lawful money of the United States of America, to the Liquidity Provider in immediately available funds, by wire transfer to ABN AMRO Bank New York, NY, ABA # 026009580, Account Name: ABN AMRO Bank N.V., Chicago Branch, Account # 650-001-1789-41, Reference: Atlas Air, Inc., 1998-1A. Section 3.05. Computations. All computations of interest based on the Base Rate shall be made on the basis of a year of 365 or 366 days, as the case may be, and all computations of interest based on the LIBOR Rate shall be made on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest is payable. Section 3.06. Payment on Non-Business Days. Whenever any payment to be made hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day and no additional interest shall be due as a result (and if so made, shall be deemed to have been made when due). If any payment in 21 17 respect of interest on an Advance is so deferred to the next succeeding Business Day, such deferral shall not delay the commencement of the next Interest Period for such Advance (if such Advance is a LIBOR Advance) or reduce the number of days for which interest will be payable on such Advance on the next interest payment date for such Advance. Section 3.07. Interest. (a) Subject to Section 2.09, the Borrower shall pay, or shall cause to be paid, without duplication, interest on (i) the unpaid principal amount of each Advance from and including the date of such Advance (or, in the case of an Applied Provider Advance, from and including the date on which the amount thereof was withdrawn from the Class A Cash Collateral Account to pay interest on the Class A Certificates) to but excluding the date such principal amount shall be paid in full (or, in the case of an Applied Provider Advance, the date on which the Class A Cash Collateral Account is fully replenished in respect of such Advance) and (ii) any other amount due hereunder (whether fees, commissions, expenses or other amounts or, to the extent permitted by law, installments of interest on Advances or any such other amount) which is not paid when due (whether at stated maturity, by acceleration or otherwise) from and including the due date thereof to but excluding the date such amount is paid in full, in each such case, at a fluctuating interest rate per annum for each day equal to the Applicable Liquidity Rate (as defined below) for such Advance or such other amount as in effect for such day, but in no event at a rate per annum greater than the maximum rate permitted by applicable law; provided, however, that, if at any time the otherwise applicable interest rate as set forth in this Section 3.07 shall exceed the maximum rate permitted by applicable law, then any subsequent reduction in such interest rate will not reduce the rate of interest payable pursuant to this Section 3.07 below the maximum rate permitted by applicable law until the total amount of interest accrued equals the amount of interest that would have accrued if such otherwise applicable interest rate as set forth in this Section 3.07 had at all times been in effect. (b) Except as provided in clause (e) below, each Advance will be either a Base Rate Advance or a LIBOR Advance as provided in this Section. Each such Advance will be a Base Rate Advance for the period from the date of its borrowing to (but excluding) the third Business Day following the Liquidity Provider's receipt of the Notice of Borrowing for such Advance. Thereafter, such Advance shall be a LIBOR Advance; provided that the Borrower (at the direction of the Controlling Party), so long as the Liquidity Provider is not the Controlling Party) may (x) convert the Final Advance into a Base Rate Advance on the last day of an Interest Period for such Advance by giving the Liquidity Provider no less than four Business Days' prior written notice of such election or (y) elect to maintain the Final Advance as a Base Rate Advance by not requesting a conversion of the Final Advance to a LIBOR Advance under Clause (5) of the applicable Notice of Borrowing. (c) Each LIBOR Advance shall bear interest during each Interest Period at a rate per annum equal to the LIBOR Rate for such Interest Period plus the Applicable 22 18 Margin for such LIBOR Advance, payable in arrears on the last day of such Interest Period and, in the event of the payment of principal of such LIBOR Advance on a day other than such last day, on the date of such payment (to the extent of interest accrued on the amount of principal repaid). (d) Each Base Rate Advance shall bear interest at a rate per annum equal to the Base Rate plus the Applicable Margin for such Base Rate Advance, payable in arrears on each Regular Distribution Date and, in the event of the payment of principal of such Base Rate Advance on a day other than a Regular Distribution Date, on the date of such payment (to the extent of interest accrued on the amount of principal repaid). (e) Each Unapplied Downgrade Advance (i) during the period from and including the date of the making of such Unapplied Downgrade Advance through but excluding the Expiry Date (or, if earlier, the date of repayment thereof or of conversion thereof into a Final Advance), shall bear interest at a rate per annum equal to the LIBOR Rate for such Interest Period plus 0.675% on the amount of such Unapplied Downgrade Advance from time to time during such period, payable in arrears on each Regular Distribution Date and (ii) thereafter, shall be a LIBOR Advance and shall bear interest in accordance with clause (c) above. (f) Each Unapplied Non-Extension Advance (i) during the period from and including the date of the making of such Unapplied Non-Extension Advance through but excluding the date of conversion thereof into a Final Advance, shall bear interest at a rate per annum equal to LIBOR for the applicable Interest Period plus 0.475% on the amount of such Unapplied Non-Extension Advance from time to time during such period, payable in arrears on each Regular Distribution Date and (ii) thereafter, shall be a LIBOR Advance and shall bear interest in accordance with clause (c) above. (g) Each amount not paid when due hereunder (whether fees, commissions, expenses or other amounts or, to the extent permitted by applicable law, installments of interest on Advances but excluding Advances) shall bear interest at a rate per annum equal to the Base Rate plus 3.00% until paid. (h) Each change in the Base Rate shall become effective immediately. The rates of interest specified in this Section 3.07 with respect to any Advance or other amount shall be referred to as the "Applicable Liquidity Rate". Section 3.08. Replacement of Borrower. From time to time and subject to the successor Borrower's meeting the eligibility requirements set forth in Section 6.9 of the Intercreditor Agreement applicable to the Subordination Agent, upon the effective date and time specified in a written and completed Notice of Replacement Subordination Agent in substantially the form of Annex VI attached hereto (a "Notice of Replacement Subordination 23 19 Agent") delivered to the Liquidity Provider by the then Borrower, the successor Borrower designated therein shall be substituted for as the Borrower for all purposes hereunder. Section 3.09. Funding Loss Indemnification. The Borrower shall pay to the Liquidity Provider, upon the request of the Liquidity Provider, such amount or amounts as shall be sufficient (in the reasonable opinion of the Liquidity Provider) to compensate it for any loss, cost, or expense incurred by reason of the liquidation or redeployment of deposits or other funds acquired by the Liquidity Provider to fund or maintain any LIBOR Advance (but excluding loss of anticipated profits) incurred as a result of: (1) Any repayment of a LIBOR Advance on a date other than the last day of the Interest Period for such Advance; or (2) Any failure by the Borrower to borrow a LIBOR Advance on the date for borrowing specified in the relevant notice under Section 2.02. Section 3.10. Illegality. Notwithstanding any other provision in this Agreement, if any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the Liquidity Provider (or its Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for the Liquidity Provider (or its Lending Office) to maintain or fund its LIBOR Advances, then upon notice to the Borrower by the Liquidity Provider, the outstanding principal amount of the LIBOR Advances shall be converted to Base Rate Advances (a) immediately upon demand of the Liquidity Provider, if such change or compliance with such request, in the judgment of the Liquidity Provider, requires immediate repayment; or (b) at the expiration of the last Interest Period to expire before the effective date of any such change or request. ARTICLE IV CONDITIONS PRECEDENT Section 4.01. Conditions Precedent to Effectiveness of Section 2,01. Section 2.01 of this Agreement shall become effective on and as of the first date (the "Effective Date") on which the following conditions precedent have been satisfied or waived: (a) The Liquidity Provider shall have received on or before the Closing Date each of the following, and in the case of each document delivered pursuant to 24 20 paragraphs (i), (ii) and (iii), each in form and substance satisfactory to the Liquidity Provider: (i) This Agreement duly executed on behalf of the Borrower; (ii) The Intercreditor Agreement duly executed on behalf of each of the parties thereto; (iii) Fully executed copies of each of the Operative Agreements executed and delivered on or before the Closing Date (other than this Agreement and the Intercreditor Agreement); (iv) A copy of the Offering Memorandum and specimen copies of the Class A Certificates; (v) An executed copy of each document, instrument, certificate and opinion delivered on or before the Closing Date pursuant to the Class A Trust Agreement, the Intercreditor Agreement and the other Operative Agreements (in the case of each such opinion, other than the opinion of counsel for the Placement Agents, either addressed to the Liquidity Provider or accompanied by a letter from the counsel rendering such opinion to the effect that the Liquidity Provider is entitled to rely on such opinion as of its date as if it were addressed to the Liquidity Provider); (vi) Evidence that there shall have been made and shall be in full force and effect, all filings, recordings and/or registrations, and there shall have been given or taken any notice or other similar action as may be reasonably necessary or, to the extent reasonably requested by the Liquidity Provider, reasonably advisable, in order to establish, perfect, protect and preserve the right, title and interest, remedies, powers, privileges, liens and security interests of, or for the benefit of, the Trustees, the Borrower and the Liquidity Provider created by the Operative Agreements executed and delivered on or prior to the Closing Date; (vii) An agreement from Atlas, pursuant to which (i) Atlas agrees to provide copies of quarterly financial statements and audited annual financial statements to the Liquidity Provider, and such other information as the Liquidity Provider shall reasonably request with respect to the transactions contemplated by the Operative Agreements, in each case, only to the extent that Atlas is obligated to provide such information pursuant to Section 8.2.1 of the Leases (related to Leased Aircraft) or the corresponding section of the Indentures (related to Owned Aircraft) to the parties thereto and (ii) Atlas agrees to allow the Liquidity Provider to inspect Atlas's books and records regarding such transactions, and to discuss such transactions with officers and employees of Atlas; and 25 21 (viii) Such other documents, instruments, opinions and approvals pertaining to the transactions contemplated hereby or by the other Operative Agreements as the Liquidity Provider shall have reasonably requested. (b) The following statement shall be true on and as of the Effective Date: No event has occurred and is continuing, or would result from the entering into of this Agreement or the making of any Advance, which constitutes a Liquidity Event of Default. (c) The Liquidity Provider shall have received payment in full of all fees and other sums required to be paid to or for the account of the Liquidity Provider on or prior to the Effective Date. (d) All conditions precedent to the issuance of the Certificates under the Trust Agreements shall have been satisfied or waived, all conditions precedent to the effectiveness of the other Liquidity Facilities shall have been satisfied or waived, and all conditions precedent to the purchase of the Certificates by the Placement Agents under the Placement Agreement shall have been satisfied (unless any of such conditions precedent shall have been waived by the Placement Agents) . (e) The Borrower shall have received a certificate, dated the date hereof, signed by a duly authorized representative of the Liquidity Provider, certifying that all conditions precedent to the effectiveness of Section 2.01 have been satisfied or waived. Section 4.02. Conditions Precedent to Borrowing. The obligation of the Liquidity Provider to make an Advance on the occasion of each Borrowing shall be subject to the conditions precedent that the Effective Date shall have occurred and, prior to the date of such Borrowing, the Borrower shall have delivered a Notice of Borrowing which conforms to the terms and conditions of this Agreement and has been completed as may be required by the relevant form of the Notice of Borrowing for the type of Advances requested. ARTICLE V COVENANTS Section 5.01. Affirmative Covenants of the Borrower. So long as any Advance shall remain unpaid or the Liquidity Provider shall have any Maximum Commitment hereunder or the Borrower shall have any obligation to pay any amount to the Liquidity Provider hereunder, the Borrower will, unless the Liquidity Provider shall otherwise consent in writing: 26 22 (a) Performance of This and Other Agreements. Punctually pay or cause to be paid all amounts payable by it under this Agreement and the other Operative Agreements and observe and perform in all material respects the conditions, covenants and requirements applicable to it contained in this Agreement and the other Operative Agreements. (b) Reporting Requirements. Furnish to the Liquidity Provider with reasonable promptness, such other information and data with respect to the transactions contemplated by the Operative Agreements as from time to time may be reasonably requested by the Liquidity Provider; and permit the Liquidity Provider, upon reasonable notice, to inspect the Borrower's books and records with respect to such transactions and to meet with officers and employees of the Borrower to discuss such transactions. (c) Certain Operative Agreements. Furnish to the Liquidity Provider with reasonable promptness, such Operative Agreements entered into after the date hereof as from time to time may be reasonably requested by the Liquidity Provider. Section 5.02. Negative Covenants of the Borrower. So long as any Advance shall remain unpaid or the Liquidity Provider shall have any Maximum Commitment hereunder or the Borrower shall have any obligation to pay any amount to the Liquidity Provider hereunder, the Borrower will not appoint or permit or suffer to be appointed any successor Borrower without the prior written consent of the Liquidity Provider, which consent shall not be unreasonably withheld or delayed. ARTICLE VI LIQUIDITY EVENTS OF DEFAULT Section 6.01. Liquidity Events of Default. If (a) any Liquidity Event of Default has occurred and is continuing and (b) there is a Performing Note Deficiency, the Liquidity Provider may, in its discretion, deliver to the Borrower a Termination Notice, the effect of which shall be to cause (i) this Agreement to expire on the fifth Business Day after the date on which such Termination Notice is received by the Borrower, (ii) the Borrower to promptly request, and the Liquidity Provider to promptly make, a Final Advance in accordance with Section 2.02(d) hereof and Section 3.6(i) of the Intercreditor Agreement, (iii) all other outstanding Advances to be automatically converted into Final Advances for purposes of determining the Applicable Liquidity Rate for interest payable thereon, and (iv) subject to Sections 2.07 and 2.09 hereof, all Advances (including, without limitation, any 27 23 Provider Advance and Applied Provider Advance), any accrued interest thereon and any other amounts outstanding hereunder to become immediately due and payable to the Liquidity Provider. ARTICLE VII MISCELLANEOUS Section 7.01. Amendments, Etc., No amendment or waiver of any provision of this Agreement, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Liquidity Provider, and, in the case of an amendment or of a waiver by the Borrower, the Borrower, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Section 7.02. Notices, Etc. Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including telecopier and mailed or delivered or sent by telecopier): Borrower: WILMINGTON TRUST COMPANY One Rodney Square 1100 North Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Telephone: (302) 651-1000 Telecopy: (302) 651-8882 Liquidity Provider: ABN AMRO BANK N.V. Aerospace Department 135 South LaSalle Street, #660 Chicago, IL 60674-9135 Attention: Claudia Heldring Telephone: (312) 904-5031 Telecopy: (312) 606-8428 with a copy to: ABN AMRO Bank N.V. 28 24 135 South LaSalle Street, #625 Chicago, IL 60674-9135 Attention: Loan Operations Telephone: (312) 904-2961 Telecopy: (312) 606-6893 or, as to each of the foregoing, at such other address as shall be designated by such Person in a written notice to the others. All such notices and communications shall be effective (i) if given by telecopier, when transmitted to the telecopier number specified above, (ii) if given by mail, when deposited in the mails addressed as specified above, and (iii) if given by other means, when delivered at the address specified above, except that written notices to the Liquidity Provider pursuant to the provisions of Articles II and III hereof shall not be effective until received by the Liquidity Provider. A copy of all notices delivered hereunder to either party shall in addition be delivered to each of the parties to the Participation Agreements at their respective addresses set forth therein. Section 7.03. No Waiver: Remedies. No failure on the part of the Liquidity Provider to exercise, and no delay in exercising, any right under this Agreement shall operate as a waiver thereof; nor shall any single or partial exercise of any right under this Agreement preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. Section 7.04. Further Assurances. The Borrower agrees to do such further acts and things and to execute and deliver to the Liquidity Provider such additional assignments, agreements, powers and instruments as the Liquidity Provider may reasonably require or deem advisable to carry into effect the purposes of this Agreement and the other Operative Agreements or to better assure and confirm unto the Liquidity Provider its rights, powers and remedies hereunder and under the other Operative Agreements. Section 7.05. Indemnification; Survival of Certain Provisions. The Liquidity Provider shall be indemnified hereunder to the extent and in the manner described in Section 9.1 of the Leased Aircraft Participation Agreement, Section 8.1 of the Owned Aircraft Participation Agreement and Section 6 of the Note Purchase Agreement. In addition, the Borrower agrees to indemnify, protect, defend and hold harmless the Liquidity Provider from, against and in respect of, and shall pay on demand, all Expenses of any kind or nature whatsoever (other than any Expenses of the nature described in Sections 3.01, 3.02 or 7.07 hereof or in the ABN AMRO Fee Letter (regardless of whether indemnified against pursuant to said Sections or in such ABN AMRO Fee Letter)), that may be imposed, incurred by or asserted against any Liquidity Indemnitee, in any way relating to, resulting from, or arising out of or in connection with any action, suit or proceeding by any third party against such 29 25 Liquidity Indemnitee and relating to this Agreement, the ABN AMRO Fee Letter, the Intercreditor Agreement or any Financing Agreement; provided, however, that the Borrower shall not be required to indemnify, protect, defend and hold harmless any Liquidity Indemnitee in respect of any Expense of such Liquidity Indemnitee to the extent such Expense is (i) attributable to the gross negligence or willful misconduct of such Liquidity Indemnitee or any other Liquidity Indemnitee, (ii) ordinary and usual operating overhead expense, or (iii) attributable to the failure by such Liquidity Indemnitee or any other Liquidity Indemnitee to perform or observe any agreement, covenant or condition on its part to be performed or observed in this Agreement, the Intercreditor Agreement, the ABN AMRO Fee Letter, the Tax Letter or any other Operative Agreement to which it is a party. The indemnities contained in Section 9.1 or 8.1, as the case may be, of the Participation Agreements, and the provisions of Sections 3.01, 3.02, 3.03, 3.09, 7.05 and 7.07 hereof, shall survive the termination of this Agreement. Section 7.06. Liability of the Liquidity Provider. (a) Neither the Liquidity Provider nor any of its officers, employees, directors or affiliates shall be liable or responsible for: (i) the use which may be made of the Advances or any acts or omissions of the Borrower or any beneficiary or transferee in connection therewith; (ii) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; or (iii) the making of Advances by the Liquidity Provider against delivery of a Notice of Borrowing and other documents which do not comply with the terms hereof; provided, however, that the Borrower shall have a claim against the Liquidity Provider, and the Liquidity Provider shall be liable to the Borrower, to the extent of any damages suffered by the Borrower which were the result of (A) the Liquidity Provider's willful misconduct or negligence in determining whether documents presented hereunder comply with the terms hereof, or (B) any breach by the Liquidity Provider of any of the terms of this Agreement, including, but not limited to, the Liquidity Provider's failure to make lawful payment hereunder after the delivery to it by the Borrower of a Notice of Borrowing strictly complying with the terms and conditions hereof. (b) Neither the Liquidity Provider nor any of its officers, employees, director or affiliates shall be liable or responsible in any respect for (i) any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with this Agreement or any Notice of Borrowing delivered hereunder, or (ii) any action, inaction or omission which may be taken by it in good faith, absent willful misconduct or negligence (in which event the extent of the Liquidity Provider's potential liability to the Borrower shall be limited as set forth in the immediately preceding paragraph), in connection with this Agreement or any Notice of Borrowing. Section 7.07. Costs, Expenses and Taxes. The Borrower agrees to pay, or cause to be paid (A) on the Effective Date and on such later date or dates on which the 30 26 Liquidity Provider shall make demand, all reasonable out-of-pocket costs and expenses (including, without limitation, the reasonable fees and expenses of outside counsel for the Liquidity Provider) of the Liquidity Provider in connection with the preparation, negotiation, execution, delivery, filing and recording of this Agreement, any other Operative Agreement and any other documents which may be delivered in connection with this Agreement and (B) on demand, all reasonable costs and expenses (including reasonable counsel fees and expenses) of the Liquidity Provider in connection with (i) the enforcement of this Agreement or any other Operative Agreement, (ii) the modification or amendment of, or supplement to, this Agreement or any other Operative Agreement or such other documents which may be delivered in connection herewith or therewith (whether or not the same shall become effective) or (iii) any action or proceeding relating to any order, injunction, or other process or decree restraining or seeking to restrain the Liquidity Provider from paying any amount under this Agreement, the Intercreditor Agreement or any other Operative Agreement or otherwise affecting the application of funds in the Class A Cash Collateral Account. In addition, the Borrower shall pay any and all recording, stamp and other similar taxes and fees payable or determined to be payable in connection with the execution, delivery, filing and recording of this Agreement, any other Operative Agreement and such other documents, and agrees to save the Liquidity Provider harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes or fees. Section 7.08. Binding Effect; Participations. (a) This Agreement shall be binding upon and inure to the benefit of the Borrower and the Liquidity Provider and their respective successors and assigns, except that neither the Liquidity Provider (except as otherwise provided in this Section 7.08) nor (except as contemplated by Section 3.08) the Borrower shall have the right to assign its rights or obligations hereunder or any interest herein without the prior written consent of the other party, subject to the requirements of Section 7.08(b). The Liquidity Provider may grant participations herein or in any of its rights hereunder (including, without limitation, funded participations and participations in rights to receive interest payments hereunder) and under the other Operative Agreements to such Persons as the Liquidity Provider may in its sole discretion select, subject to the requirements of Section 7.08(b). No such participation by the Liquidity Provider, however, will relieve the Liquidity Provider of its obligations hereunder. In connection with any participation or any proposed participation, the Liquidity Provider may disclose to the participant or the proposed participant any information that the Borrower is required to deliver or to disclose to the Liquidity Provider pursuant to this Agreement. The Borrower acknowledges and agrees that the Liquidity Provider's source of funds may derive in part from its participants (other than Atlas). Accordingly, references in this Agreement and the other Operative Agreements to determinations, reserve and capital adequacy requirements, increased costs, reduced receipts, additional amounts due pursuant to Section 3.03(a) and the like as they pertain to the Liquidity Provider shall be deemed also to include those of each of its participants (subject, in each case, to the maximum amount that 31 27 would have been incurred by or attributable to the Liquidity Provider directly if the Liquidity Provider, rather than the participant, had held the interest participated). (b) If, pursuant to subsection (a) above, the Liquidity Provider sells any participation in this Agreement to any bank or other entity (each, a "Transferee"), then, concurrently with the effectiveness of such participation, the Transferee shall (i) represent to the Liquidity Provider (for the benefit of the Liquidity Provider and the Borrower) either (A) that it is incorporated under the laws of the United States or a state thereof or (B) that under applicable law and treaties, no taxes will be required to be withheld with respect to any payments to be made to such Transferee in respect of this Agreement, (ii) furnish to the Liquidity Provider and the Borrower either (x) a statement that it is incorporated under the laws of the United States or a state thereof or (y) if it is not so incorporated, two copies of a properly completed United States Internal Revenue Service Form 4224 or Form 1001, as appropriate, or other applicable form, certificate or document prescribed by the Internal Revenue Service certifying, in each case, such Transferee's entitlement to a complete exemption from United States federal withholding tax in respect to any and all payments to be made hereunder, and (iii) agree (for the benefit of the Liquidity Provider and the Borrower) to provide the Liquidity Provider and the Borrower a new Form 4224 or Form 1001, as appropriate, (A) on or before the date that any such form expires or becomes obsolete or (B) after the occurrence of any event requiring a change in the most recent form previously delivered by it and prior to the immediately following due date of any payment by the Borrower hereunder, certifying in the case of a Form 1001 or Form 4224 that such Transferee is entitled to a complete exemption from United States federal withholding tax on payments under this Agreement. Unless the Borrower has received forms or other documents reasonably satisfactory to it (and required by applicable law) indicating that payments hereunder are not subject to United States federal withholding tax, the Borrower will withhold taxes as required by law from such payments at the applicable statutory rate. (c) Notwithstanding the other provisions of this Section 7.08, the Liquidity Provider may assign and pledge all or any portion of the Advances owing to it to any Federal Reserve Bank or the United States Treasury as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank, provided that any payment in respect of such assigned Advances made by the Borrower to the Liquidity Provider in accordance with the terms of this Agreement shall satisfy the Borrower's obligations hereunder in respect of such assigned Advance to the extent of such payment. No such assignment shall release the Liquidity Provider from its obligations hereunder. Section 7.09. Severability. Any provision of this Agreement which is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or nonauthorization without 32 28 invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction. Section 7.10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. Section 7.11. Submission to Jurisdiction; Waiver of Jury Trial; Waiver of Immunity. (a) Each of the parties hereto hereby irrevocably and unconditionally: (i) submits for itself and its property in any legal action or proceeding relating to this Agreement or any other Operative Agreement, or for recognition and enforcement of any judgment in respect hereof or thereof, to the nonexclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and the appellate courts from any thereof; (ii) consents that any such action or proceeding may be brought in such courts, and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (iii) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form and mail), postage prepaid, to each party hereto at its address set forth in Section 7.02 hereof, or at such other address of which the Liquidity Provider shall have been notified pursuant thereto; and (iv) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction. (b) THE BORROWER AND THE LIQUIDITY PROVIDER EACH HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE RELATIONSHIP THAT IS BEING ESTABLISHED, including, without limitation, contract claims, tort claims, breach of duty claims and all other common law and statutory claims. The Borrower and the Liquidity Provider each warrant and represent that it has reviewed this waiver with its legal counsel, and that it knowingly and voluntarily waives its jury trial rights following consultation with 33 29 such legal counsel. THIS WAIVER IS IRREVOCABLE, AND CANNOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. (c) The Liquidity Provider hereby waives any immunity it may have from the jurisdiction of the courts of the United States or of any State and waives any immunity any of its properties located in the United States may have from attachment or execution upon a judgement entered by any such court under the United States Foreign Sovereign Immunities Act of 1976 or any similar successor legislation. Section 7.12. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Agreement. Section 7.13. Entirety. This Agreement, the Intercreditor Agreement and the other Operative Agreements to which the Liquidity Provider is a party constitute the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior understandings and agreements of such parties. Section 7.14. Headings. Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. Section 7.15. Transfer. The Liquidity Provider hereby acknowledges and consents to the Transfer contemplated by the Assignment and Assumption Agreement. Section 7.16. LIQUIDITY PROVIDER's OBLIGATION TO MAKE ADVANCES. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE OBLIGATIONS OF THE LIQUIDITY PROVIDER TO MAKE ADVANCES HEREUNDER, AND THE BORROWER'S RIGHTS TO DELIVER NOTICES OF BORROWING REQUESTING THE MAKING OF ADVANCES HEREUNDER, SHALL BE UNCONDITIONAL AND IRREVOCABLE, AND SHALL BE PAID OR PERFORMED, IN EACH CASE STRICTLY IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT. 34 30 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first set forth above. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Subordination Agent, as agent and trustee for the Class A Trust, as Borrower By: /s/ JAMES P. LAWLER ------------------------------------ Name: JAMES P. LAWLER Title: Vice President ABN AMRO BANK N.V., Chicago Branch, as Liquidity Provider By: /s/ CLAUDIA C. HELDRING ------------------------------------ Name: Claudia C. Heldring Title: Vice President By: /s/ LUKAS VAN DER HOEF ------------------------------------ Name: Lukas van der Hoef Title: Vice President 35 Annex I to Revolving Credit Agreement INTEREST ADVANCE NOTICE OF BORROWING The undersigned, a duly authorized signatory of the undersigned borrower (the "Borrower"), hereby certifies to ABN AMRO Bank N.V., Chicago Branch (the "Liquidity Provider"), with reference to the Revolving Credit Agreement (1998-lA) dated as of February 9, 1998, between the Borrower and the Liquidity Provider (the "Liquidity Agreement"; the terms defined therein and not otherwise defined herein being used herein as therein defined or referenced), that: (1) The Borrower is the Subordination Agent under the Intercreditor Agreement. (2) The Borrower is delivering this Notice of Borrowing for the making of an Interest Advance by the Liquidity Provider to be used, subject to clause (3)(v) below, for the payment of the interest on the Class A Certificates which was payable on _______________________ ________ (the "Distribution Date") in accordance with the terms and provisions of the Class A Trust Agreement and the Class A Certificates which Advance is requested to be made on __________, ____. (3) The amount of the Interest Advance requested hereby (i) is $ _______, to be applied in respect of the payment of the interest which was due and payable on the Class A Certificates on the Distribution Date, (ii) does not include any amount with respect to the payment of principal of, or premium on, the Class A Certificates, the Class B Certificates or the Class C Certificates, or interest on the Class B Certificates, or the Class C Certificates, (iii) was computed in accordance with the provisions of the Class A Certificates, the Class A Trust Agreement and the Intercreditor Agreement (a copy of which computation is attached hereto as Schedule I), (iv) does not exceed the Maximum Commitment on the date hereof, (v) does not include any amount of interest which was due and payable on the Class A Certificates on such Distribution Date but which remains unpaid due to the failure of the Depositary to pay any amount of accrued interest on the Certificates of Deposit on such Distribution Date and (vi) has not been and is not the subject of a prior or contemporaneous Notice of Borrowing. (4) Upon receipt by or on behalf of the Borrower of the amount requested hereby, (a) the Borrower will apply the same in accordance with the terms of Section 3.6(b) of the Intercreditor Agreement, (b) no portion of such amount shall be applied by the Borrower for any other purpose and (c) no portion of such amount until so applied shall be commingled with other funds held by the Borrower. 36 I-2 The Borrower hereby acknowledges that, pursuant to the Liquidity Agreement, the making of the Interest Advance as requested by this Notice of Borrowing shall automatically reduce, subject to reinstatement in accordance with the terms of the Liquidity Agreement, the Maximum Commitment by an amount equal to the amount of the Interest Advance requested to be made hereby as set forth in clause (i) of paragraph (3) of this Certificate and such reduction shall automatically result in corresponding reductions in the amounts available to be borrowed pursuant to a subsequent Advance. IN WITNESS WHEREOF, the Borrower has executed and delivered this Notice of Borrowing as of the __ day of ________________, _____. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Subordination Agent, as Borrower By: ------------------------------------- Name: Title: 37 SCHEDULE I TO INTEREST ADVANCE NOTICE OF BORROWING [Insert Copy of Computations in accordance with Interest Advance Notice of Borrowing] 38 Annex II to Revolving Credit Agreement NON-EXTENSION ADVANCE NOTICE OF BORROWING The undersigned, a duly authorized signatory of the undersigned subordination agent (the "Borrower"), hereby certifies to ABN AMRO BANK N.V., Chicago Branch (the "Liquidity Provider"), with reference to the Revolving Credit Agreement (1998-lA) dated as of February 9, 1998, between the Borrower and the Liquidity Provider (the "Liquidity Agreement"; the terms defined therein and not otherwise defined herein being used herein as therein defined or referenced), that: (1) The Borrower is the Subordination Agent under the Intercreditor Agreement. (2) The Borrower is delivering this Notice of Borrowing for the making of the Non-Extension Advance by the Liquidity Provider to be used for the funding of the Class A Cash Collateral Account in accordance with Section 3.6(d) of the Intercreditor Agreement, which Advance is requested to be made on _______________, ____. (3) The amount of the Non-Extension Advance requested hereby (i) is $______________________.__ which equals the Maximum Commitment on the date hereof and is to be applied in respect of the funding of the Class A Cash Collateral Account in accordance with Section 3.6(d) of the Intercreditor Agreement, (ii) does not include any amount with respect to the payment of the principal of, or premium on, the Class A Certificates, or principal of, or interest or premium on, the Class B Certificates or the Class C Certificates, (iii) was computed in accordance with the provisions of the Class A Certificates, the Class A Trust Agreement and the Intercreditor Agreement (a copy of which computation is attached hereto as Schedule I), and (iv) has not been and is not the subject of a prior or contemporaneous Notice of Borrowing under the Liquidity Agreement. (4) Upon receipt by or on behalf of the Borrower of the amount requested hereby, (a) the Borrower will deposit such amount in the Class A Cash Collateral Account and apply the same in accordance with the terms of Section 3.6(d) of the Intercreditor Agreement, (b) no portion of such amount shall be applied by the Borrower for any other purpose and (c) no portion of such amount until so applied shall be commingled with other funds held by the Borrower. (5) The Borrower hereby requests that the Advance requested hereby be a Base Rate Advance and that such Base Rate Advance be converted into a LIBOR Advance on the third Business Day following your receipt of this notice. 39 II-2 The Borrower hereby acknowledges that, pursuant to the Liquidity Agreement, (A) the making of the Non- Extension Advance as requested by this Notice of Borrowing shall automatically and irrevocably terminate the obligation of the Liquidity Provider to make further Advances under the Liquidity Agreement; and (B) following the making by the Liquidity Provider of the NonExtension Advance requested by this Notice of Borrowing, the Borrower shall not be entitled to request any further Advances under the Liquidity Agreement. IN WITNESS WHEREOF, the Borrower has executed and delivered this Notice of Borrowing as of the ____ day of ______________, ____. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Subordination Agent, as Borrower By: ------------------------------------- Name: Title: 40 SCHEDULE I TO NON-EXTENSION ADVANCE NOTICE OF BORROWING [Insert Copy of computations in accordance with Non-Extension Advance Notice of Borrowing] 41 Annex III to Revolving Credit Agreement DOWNGRADE ADVANCE NOTICE OF BORROWING The undersigned, a duly authorized signatory of the undersigned subordination agent (the "Borrower"), hereby certifies to ABN AMRO BANK N.V., Chicago Branch (the "Liquidity Provider"), with reference to the Revolving Credit Agreement (1998-lA) dated as of February 9, 1998, between the Borrower and the Liquidity Provider (the "Liquidity Agreement"; the terms defined therein and not otherwise defined herein being used herein as therein defined or referenced), that: (1) The Borrower is the Subordination Agent under the Intercreditor Agreement. (2) The Borrower is delivering this Notice of Borrowing for the making of the Downgrade Advance by the Liquidity Provider to be used for the funding of the Class A Cash Collateral Account in accordance with Section 3.6(c) of the Intercreditor Agreement by reason of the downgrading of the short-term unsecured debt rating of the Liquidity Provider issued by either Rating Agency below the Threshold Rating, which Advance is requested to be made on __________, ____. (3) The amount of the Downgrade Advance requested hereby (i) is $________.____, which equals the Maximum Commitment on the date hereof and is to be applied in respect of the funding of the Class A Cash Collateral Account in accordance with Section 3.6(c) of the Intercreditor Agreement, (ii) does not include any amount with respect to the payment of the principal of, or premium on, the Class A Certificates, or principal of, or interest or premium on, the Class B Certificates or the Class C Certificates, (iii) was computed in accordance with the provisions of the Class A Certificates, the Class A Trust Agreement and the Intercreditor Agreement (a copy of which computation is attached hereto as Schedule I), and (iv) has not been and is not the subject of a prior or contemporaneous Notice of Borrowing under the Liquidity Agreement. (4) Upon receipt by or on behalf of the Borrower of the amount requested hereby, (a) the Borrower will deposit such amount in the Class A Cash Collateral Account and apply the same in accordance with the terms of Section 3.6(c) of the Intercreditor Agreement, (b) no portion of such amount shall be applied by the Borrower for any other purpose and (c) no portion of such amount until so applied shall be commingled with other funds held by the Borrower. 42 III-2 The Borrower hereby acknowledges that, pursuant to the Liquidity Agreement, (A) the making of the Downgrade Advance as requested by this Notice of Borrowing shall automatically and irrevocably terminate the obligation of the Liquidity Provider to make further Advances under the Liquidity Agreement; and (B) following the making by the Liquidity Provider of the Downgrade Advance requested by this Notice of Borrowing, the Borrower shall not be entitled to request any further Advances under the Liquidity Agreement. IN WITNESS WHEREOF, the Borrower has executed and delivered this Notice of Borrowing as of the ___ day of _________________,____. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Subordination Agent, as Borrower By: ------------------------------------- Name: Title: 43 SCHEDULE I TO DOWNGRADE ADVANCE NOTICE OF BORROWING [Insert Copy of computations in accordance with Downgrade Advance Notice of Borrowing] 44 Annex IV to Revolving Credit Agreement FINAL ADVANCE NOTICE OF BORROWING The undersigned, a duly authorized signatory of the undersigned borrower (the "Borrower"), hereby certifies to ABN AMRO BANK N.V., Chicago Branch (the "Liquidity Provider"), with reference to the Revolving Credit Agreement (1998-lA) dated as of February 9, 1998, between the Borrower and the Liquidity Provider (the "Liquidity Agreement"; the terms defined therein and not otherwise defined herein being used herein as therein defined or referenced), that: (1) The Borrower is the Subordination Agent under the Intercreditor Agreement. (2) The Borrower is delivering this Notice of Borrowing for the making of the Final Advance by the Liquidity Provider to be used for the funding of the Class A Cash Collateral Account in accordance with Section 3.6(i) of the Intercreditor Agreement by reason of the receipt by the Borrower of a Termination Notice from the Liquidity Provider with respect to the Liquidity Agreement, which Advance is requested to be made on (3) The amount of the Final Advance requested hereby (i) is $__________.__, which equals the Maximum Commitment on the date hereof and is to be applied in respect of the funding of the Class A Cash Collateral Account in accordance with Section 3.6(i) of the Intercreditor Agreement, (ii) does not include any amount with respect to the payment of principal of, or premium on, the Class A Certificates, or principal of, or interest or premium on, the Class B Certificates or the Class C Certificates, (iii) was computed in accordance with the provisions of the Class A Certificates, the Class A Trust Agreement and the Intercreditor Agreement (a copy of which computation is attached hereto as Schedule I), and (iv) has not been and is not the subject of a prior or contemporaneous Notice of Borrowing. (4) Upon receipt by or on behalf of the Borrower of the amount requested hereby, (a) the Borrower will deposit such amount in the Class A Cash Collateral Account and apply the same in accordance with the terms of Section 3.6(i) of the Intercreditor Agreement, (b) no portion of such amount shall be applied by the Borrower for any other purpose and (c) no portion of such amount until so applied shall be commingled with other funds held by the Borrower. (5) The Borrower hereby requests that the Advance requested hereby be a Base Rate Advance and that such Base Rate Advance be converted into a LIBOR Advance on the third Business Day following your receipt of this notice. 45 IV-2 The Borrower hereby acknowledges that, pursuant to the Liquidity Agreement, (A) the making of the Final Advance as requested by this Notice of Borrowing shall automatically and irrevocably terminate the obligation of the Liquidity Provider to make further Advances under the Liquidity Agreement; and (B) following the making by the Liquidity Provider of the Final Advance requested by this Notice of Borrowing, the Borrower shall not be entitled to request any further Advances under the Liquidity Agreement. IN WITNESS WHEREOF, the Borrower has executed and delivered this Notice of Borrowing as of the ___ day of ______________, ____. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Subordination Agent, as Borrower By: ------------------------------------- Name: Title: 46 SCHEDULE I TO FINAL ADVANCE NOTICE OF BORROWING [Insert Copy of Computations in accordance with Final Advance Notice of Borrowing] 47 Annex V to Revolving Credit Agreement NOTICE OF TERMINATION [Date] Wilmington Trust Company, as Subordination Agent, as Borrower One Rodney Square 1100 North Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Revolving Credit Agreement dated as of February 9, 1998, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the Atlas Air, Inc. Pass Through Trust, 1998-lA-[O][S], as Borrower, and ABN AMRO BANK N.V., Chicago Branch (the "Liquidity Agreement") - -------------------------------------------------------------------------------- Ladies and Gentlemen: You are hereby notified that pursuant to Section 6.01 of the Liquidity Agreement, by reason of the occurrence of a Liquidity Event of Default and the existence of a Performing Note Deficiency (each as defined therein), we are giving this notice to you in order to cause (i) our obligations to make Advances (as defined therein) under such Liquidity Agreement to terminate on the fifth Business Day after the date on which you receive this notice and (ii) you to request a Final Advance under the Liquidity Agreement pursuant to Section 3.6(i) of the Intercreditor Agreement (as defined in the Liquidity Agreement) as a consequence of your receipt of this notice. 48 V-2 THIS NOTICE IS THE "NOTICE OF TERMINATION" PROVIDED FOR UNDER THE LIQUIDITY AGREEMENT. OUR OBLIGATIONS TO MAKE ADVANCES UNDER THE LIQUIDITY AGREEMENT WILL TERMINATE ON THE FIFTH BUSINESS DAY AFTER THE DATE ON WHICH YOU RECEIVE THIS NOTICE. Very truly yours, ABN AMRO BANK N.V., Chicago Branch, as Liquidity Provider By: ----------------------------------- Name: Title: By: ----------------------------------- Name: Title: cc: Wilmington Trust Company, as Class A Trustee 49 Annex VI to Revolving Credit Agreement NOTICE OF REPLACEMENT SUBORDINATION AGENT [Date] Attention: Revolving Credit Agreement dated as of February 9, 1998, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the Atlas Air Pass Through Trust, 1998-lA-[O][S], as Borrower, and ABN AMRO BANK N.V., Chicago Branch (the "Liquidity Agreement") - -------------------------------------------------------------------------------- Ladies and Gentlemen: For value received, the undersigned beneficiary hereby irrevocably transfers to: [Name of Transferee] [Address of Transferee] all rights and obligations of the undersigned as Borrower under the Liquidity Agreement referred to above. The transferee has succeeded the undersigned as Subordination Agent under the Intercreditor Agreement referred to in the first paragraph of the Liquidity Agreement, pursuant to the terms of Section 8.1 of the Intercreditor Agreement. By this transfer, all rights of the undersigned as Borrower under the Liquidity Agreement are transferred to the transferee and the transferee shall hereafter have the sole rights and obligations as Borrower thereunder. The undersigned shall pay any costs and expenses of such transfer, including, but not limited to, transfer taxes or governmental charges. 50 VI-2 We ask that this transfer be effective as of _______________, ____. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Subordination Agent, as Borrower By : --------------------------------------- Name: Title: EX-10.104 18 REVOLVING CREDIT AGREEMENT 1998-1B 1 EXHIBIT 10.104 EXECUTION COPY - -------------------------------------------------------------------------------- REVOLVING CREDIT AGREEMENT (1998-lB) Dated as of February 9, 1998 between WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Subordination Agent, as agent and trustee for the Atlas Air Pass Through Trust 1998-lB-0, as Borrower and MORGAN STANLEY CAPITAL SERVICES, INC., as Liquidity Provider - -------------------------------------------------------------------------------- Relating to Atlas Air Pass Through Trust 1998-lB-0 7.68% Atlas Air Pass Through Certificates, Series 1998-lB-0 2 TABLE OF CONTENTS
PAGE ---- ARTICLE I DEFINITIONS Section 1.01. Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE II AMOUNT AND TERMS OF THE COMMITMENT Section 2.01. The Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 2.02. Making the Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 2.03. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 2.04. Reduction or Termination of the Maximum Commitment . . . . . . . . . . . . . . . . . . . . . 10 Section 2.05. Repayments of Interest Advances or the Final Advance . . . . . . . . . . . . . . . . . . . . 11 Section 2.06. Repayments of Provider Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 2.07. Payments to the Liquidity Provider Under the Intercreditor Agreement . . . . . . . . . . . . 12 Section 2.08. Book Entries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 2.09. Payments from Available Funds Only . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 2.10. [Intentionally omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 ARTICLE III OBLIGATIONS OF THE BORROWER Section 3.01. Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 3.02. Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 3.03. Payments Free of Deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 3.04. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 3.05. Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 3.06. Payment on Non-Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 3.07. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 3.08. Replacement of Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 3.09. Funding Loss Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 3.10. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
i 3 ARTICLE IV CONDITIONS PRECEDENT Section 4.01. Conditions Precedent to Effectiveness of Section 2.01 . . . . . . . . . . . . . . . . . . . . 19 Section 4.02. Conditions Precedent to Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 ARTICLE V COVENANTS Section 5.01. Affirmative Covenants of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Section 5.02. Negative Covenants of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 ARTICLE VI LIQUIDITY EVENTS OF DEFAULT Section 6.01. Liquidity Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 ARTICLE VII MISCELLANEOUS Section 7.01. Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 7.02. Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Section 7.03. No Waiver: Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Section 7.04. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 7.05. Indemnification; Survival of Certain Provisions . . . . . . . . . . . . . . . . . . . . . . . 24 Section 7.06. Liability of the Liquidity Provider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 7.07. Costs, Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 7.08. Binding Effect; Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Section 7.09. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Section 7.10. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Section 7.11. Submission to Jurisdiction; Waiver of Jury Trial; Waiver of Immunity . . . . . . . . . . . . 27 Section 7.12. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 7.13. Entirety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 7.14. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 7.15. Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 7.16. LIQUIDITY PROVIDER's OBLIGATION TO MAKE ADVANCES . . . . . . . . . . . . . . . . . . . . . . 29
ii 4 ANNEX I Interest Advance Notice of Borrowing ANNEX II Downgrade Advance Notice of Borrowing ANNEX III Final Advance Notice of Borrowing ANNEX IV Notice of Termination ANNEX V Notice of Replacement Subordination Agent EXHIBIT I Form of Guarantee Agreement iii 5 REVOLVING CREDIT AGREEMENT This REVOLVING CREDIT AGREEMENT dated as of February 9, 1998, between WILMINGTON TRUST COMPANY, a Delaware corporation ("WTC"), not in its individual capacity but solely as Subordination Agent under the Intercreditor Agreement (each as defined below), as agent and trustee for the Class B Trust (as defined below) (the "Borrower"), and MORGAN STANLEY CAPITAL SERVICES, INC., a Delaware corporation ("MSCS" or the "Liquidity Provider"). W I T N E S S E T H: WHEREAS, pursuant to the Class B Trust Agreement (such term and all other capitalized terms used in these recitals having the meanings set forth or referred to in Section 1.01), the Class B Trust is issuing the Class B Certificates; WHEREAS, the Borrower, in order to support the timely payment of a portion of the interest on the Class B Certificates in accordance with their terms, has requested the Liquidity Provider to enter into this Agreement, providing in part for the Borrower to request in specified circumstances that Advances be made hereunder; and WHEREAS, the Liquidity Provider has requested Morgan Stanley, Dean Witter, Discover & Co. (the "Guarantor") to enter into a Guarantee Agreement, providing for the full and unconditional guarantee of the Liquidity Provider's obligations under this Agreement; NOW, THEREFORE, in consideration of the premises, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.01. Certain Defined Terms. (a) Definitions. As used in this Agreement and unless otherwise expressly indicated, or unless the context clearly requires otherwise, the following capitalized terms shall have the following respective meanings for all purposes of this Agreement: "Additional Cost" has the meaning assigned to such term in Section 3.01. "Advance" means an Interest Advance, a Final Advance, a Provider Advance, an Applied Provider Advance or an Unpaid Advance, as the case may be. 6 2 "Applicable Liquidity Rate" has the meaning assigned to such term in Section 3.07(h). "Applicable Margin" means (x) with respect to any Unpaid Advance or Applied Provider Advance, 1.75% and (y) with respect to any Unapplied Downgrade Advance, 0.40%. "Applied Downgrade Advance" has the meaning assigned to such term in Section 2.06(a). "Applied Provider Advance" has the meaning assigned to such term in Section 2.06(a). "Assignment and Assumption Agreement" means the Assignment and Assumption to be entered into between the Borrower and the trustee of the Successor Trust, substantially in the form of Exhibit D to the Class B Trust Agreement. "Base Rate" means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to (a) the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or if such rate is not so published for any day that is a Business Day, the average of the quotations for such day for such transactions received by the Liquidity Provider from three Federal funds brokers of recognized standing selected by it, plus (b) one-quarter of one percent (1/4 of 1%). "Base Rate Advance" means an Advance that bears interest at a rate based upon the Base Rate. "Borrower" has the meaning assigned to such term in the recital of parties to this Agreement. "Borrowing" means the making of Advances requested by delivery of a Notice of Borrowing. "Business Day" means any day other than a Saturday or Sunday or a day on which commercial banks are required or authorized to close in Denver, Colorado, Chicago, Illinois, New York, New York, or, so long as any Class B Certificate is outstanding, the city and state in which the Class B Trustee, the Borrower or any Loan Trustee maintains its Corporate Trust Office or receives or disburses funds, and, if the applicable Business Day relates to any Advance or other amount bearing interest 7 3 based on the LIBOR Rate, on which dealings are carried on in the London interbank market. "Certificates of Deposit" has the meaning assigned to such term in the Deposit Agreement. "Deposits" has the meaning assigned to such terms in the Deposit Agreement. "Depositary" has the meaning assigned to such term in the Deposit Agreement. "Deposit Agreement" means the Deposit Agreement dated February 9, 1998 between First Security Bank, National Association, as Escrow Agent and ABN AMRO Bank N.V., acting through its Chicago Branch, as Depositary, pertaining to the Class B Certificates, as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof. "Downgrade Advance" means an Advance made pursuant to Section 2.02(c). "Effective Date" has the meaning specified in Section 4.01. The delivery of the certificate of the Liquidity Provider contemplated by Section 4.01(e) shall be conclusive evidence that the Effective Date has occurred. "Excluded Taxes" means (i) taxes imposed on the overall net income of the Liquidity Provider or of its Lending Office by the jurisdiction where such Liquidity Provider's principal office or such Lending Office is located, and (ii) Excluded Withholding Taxes. "Excluded Withholding Taxes" means (i) withholding Taxes imposed by the United States except to the extent that such United States withholding Taxes are imposed as a result of any change in applicable law after the date hereof (excluding from change in applicable law for this purpose a change in an applicable treaty or other change in law affecting the applicability of a treaty), or in the case of a successor Liquidity Provider (including a transferee of an Advance) or Lending Office, after the date on which such successor Liquidity Provider obtains its interest or on which the Lending Office is changed, and (ii) any withholding Taxes imposed by the United States which are imposed or increased as a result of the Liquidity Provider failing to deliver to the Borrower any certificate or document (which certificate or document in the good faith judgment of the Liquidity Provider it is legally entitled to provide) which is reasonably requested by the Borrower to establish that payments under this Agreement are exempt from (or entitled to a reduced rate of) withholding Tax. 8 4 "Expenses" means liabilities, obligations, damages, settlements, penalties, claims, actions, suits, costs, expenses, and disbursements (including, without limitation, reasonable fees and disbursements of legal counsel and costs of investigation), provided that Expenses shall not include any Taxes. "Expiry Date" means July 2, 2015. "Final Advance" means an Advance made pursuant to Section 2.02(d). "Intercreditor Agreement" means the Intercreditor Agreement dated the date hereof, among the Trustees, the Liquidity Provider, the liquidity provider under each Liquidity Facility (other than this Agreement) and the Subordination Agent, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Interest Advance" means an Advance made pursuant to Section 2.02(a). "Interest Period" means, with respect to any LIBOR Advance, each of the following periods: (i) the period beginning on the third Business Day following either (x) the Liquidity Provider's receipt of the Notice of Borrowing for such LIBOR Advance (or, in the case of an Unapplied Downgrade Advance, the period beginning on the Expiry Date) or (y) the withdrawal of funds from the Class B Cash Collateral Account for the purpose of paying interest on the Class B Certificates as contemplated by Section 2.06(a) hereof and, in either case, ending on the next Regular Distribution Date (or ending, in the case of an Interest Period applicable to any Unapplied Provider Advance, on the numerically corresponding day in the first or sixth calendar month after the first day of the applicable Interest Period and/or on the next Regular Distribution Date, as Atlas may select by providing notice thereof to the Borrower and the Liquidity Provider no later than three Business Days prior to the commencement of such Interest Period, provided that if Atlas shall not provide such a notice at least three Business Days prior to the commencement of such Interest Period, then Atlas shall be deemed to have selected an Interest Period ending on the next Regular Distribution Date); and (ii) each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the next Regular Distribution Date (or ending, in the case of an Interest Period applicable to any 9 5 Unapplied Provider Advance, on the numerically corresponding day in the first or sixth calendar month after the first day of the applicable Interest Period and/or on the next Regular Distribution Date, as Atlas may select by providing notice thereof to the Borrower and the Liquidity Provider no later than three Business Days prior to the commencement of such Interest Period, provided that if Atlas shall not provide such a notice at least three Business Days prior to the commencement of such Interest Period, then Atlas shall be deemed to have selected an Interest Period ending on the next Regular Distribution Date); provided, however, that (I) if an Unapplied Provider Advance which is a LIBOR Advance becomes an Applied Provider Advance, the Interest Period then applicable to such Unapplied Provider Advance shall be applicable to such Applied Provider Advance and (II) if (x) the Final Advance shall have been made, or (y) other outstanding Advances shall have been converted into the Final Advance, then the Interest Periods shall be successive periods of one month beginning on the third Business Day following the Liquidity Provider's receipt of the Notice of Borrowing for such Final Advance (in the case of clause (x) above) or the Regular Distribution Date following such conversion (in the case of clause (y) above). "Leased Aircraft Participation Agreement" means a participation agreement substantially in the form of Exhibit A-1 to the Note Purchase Agreement. "Lending Office" means the lending office of the Liquidity Provider presently located at New York, New York, or such other lending office as the Liquidity Provider from time to time shall notify the Borrower as its lending office hereunder; provided that the Liquidity Provider shall not change its Lending Office to a Lending Office outside the United States of America except in accordance with Section 3.01, 3.02 or 3.03 hereof. "LIBOR Advance" means an Advance bearing interest at a rate based upon the LIBOR Rate. "LIBOR Rate" means, with respect to any Interest Period, the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the rates per annum at which deposits in dollars are offered to major banks in the London interbank market at approximately 11:00 A.M. (London time) two Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Advance to which such Interest Period is to apply and for a period of time comparable to such Interest Period. 10 6 "Liquidity Event of Default" means the occurrence of either (a) the acceleration of all of the Equipment Notes or (b) an Atlas Bankruptcy Event. "Liquidity Indemnitee" means (i) the Liquidity Provider, (ii) the directors, officers, employees and agents of the Liquidity Provider, and (iii) the successors and permitted assigns of the persons described in clauses (i) and (ii), inclusive. "Liquidity Provider" has the meaning assigned to such term in the recital of parties to this Agreement. "Maximum Commitment" shall mean, subject to the proviso contained in the third sentence of Section 2.02(a), at any time of determination, (a) the Required Amount at such time less (b) the aggregate amount of each Interest Advance outstanding at such time; provided that following a Provider Advance or a Final Advance, the Maximum Commitment shall be zero. "Notice of Borrowing" has the meaning specified in Section 2.02(e). "Notice of Replacement Subordination Agent" has the meaning specified in Section 3.08. "Offering Memorandum" means the Offering Memorandum dated January 27, 1998 relating to the Certificates, as such Offering Memorandum may be amended or supplemented. "Owned Aircraft Participation Agreement" means a participation agreement substantially in the form of Exhibit C-1 to the Note Purchase Agreement. "Participation Agreements" means, collectively, the Leased Aircraft Participation Agreement and the Owned Aircraft Participation Agreement. "Performing Note Deficiency" means any time that less than 65% of the then aggregate outstanding principal amount of all Equipment Notes are Performing Equipment Notes. "Provider Advance" means a Downgrade Advance. "Regulatory Change" has the meaning assigned to such term in section 3.01. "Replenishment Amount" has the meaning assigned to such term in Section 2.06(b). 11 7 "Required Amount" means, for any day, the sum of the aggregate amount of interest, calculated at the rate per annum equal to the Stated Interest Rate for the Class B Certificates, that would be payable on the Class B Certificates on each of the three successive semiannual Regular Distribution Dates immediately following such day or, if such day is a Regular Distribution Date, on such day and the succeeding two semiannual Regular Distribution Dates, in each case calculated on the basis of the Pool Balance of the Class B Certificates on such day and without regard to expected future payments of principal on the Class B Certificates. "Successor Trust" means Atlas Air Pass Through Trust 1998-lB-S. "Termination Date" means the earliest to occur of the following: (i) the Expiry Date; (ii) the date on which the Borrower delivers to the Liquidity Provider a certificate, signed by a Responsible Officer of the Borrower, certifying that all of the Class B Certificates have been paid in full (or provision has been made for such payment in accordance with the Intercreditor Agreement and the Trust Agreements) or are otherwise no longer entitled to the benefits of this Agreement; (iii) the date on which the Borrower delivers to the Liquidity Provider a certificate, signed by a Responsible Officer of the Borrower, certifying that a Replacement Liquidity Facility has been substituted for this Agreement in full pursuant to Section 3.6(e) of the Intercreditor Agreement; (iv) the fifth Business Day following the receipt by the Borrower of a Termination Notice from the Liquidity Provider pursuant to Section 6.01 hereof; and (v) the date on which no Advance is or may (including by reason of reinstatement as herein provided) become available for a Borrowing hereunder. "Termination Notice" means the Notice of Termination substantially in the form of Annex IV to this Agreement. "Transferee" has the meaning assigned to such term in Section 7.08(b). "Unapplied Downgrade Advance" means any Downgrade Advance other than an Applied Downgrade Advance. "Unapplied Provider Advance" means any Provider Advance other than an Applied Provider Advance. "Unpaid Advance" has the meaning assigned to such term in Section 2.05. (b) Terms Defined in the Intercreditor Agreement. For all purposes of this Agreement, the following terms shall have the respective meanings assigned to such terms in the Intercreditor Agreement: 12 8 "Atlas", "Atlas Bankruptcy Event", "Certificates", "Class A Certificates", "Class B Cash Collateral Account", "Class B Certificates", "Class B Certificateholders", "Class B Trust", "Class B Trust Agreement", "Class B Trustee", "Class C Certificates", "Closing Date", "Controlling Party", "Corporate Trust Office", "Distribution Date", "Downgraded Facility", "Equipment Notes", "Final Maturity Date", "Financing Agreement", "Fitch", "Guarantee Event", "Guarantor", "Indenture", "Interest Payment Date", "Investment Earnings", "Liquidity Facility", "Liquidity Obligations", "Loan Trustee", "Moody's", "MSCS Fee Letter", "MSCS Liquidity Facilities", "Note Purchase Agreement", "Operative Agreements", "Performing Equipment Note", "Person", "Placement Agents", "Placement Agreement", "Pool Balance", "Rating Agency", "Ratings Confirmation", "Regular Distribution Date", "Replacement Liquidity Facility", "Responsible Officer", "Scheduled Payment", "Special Payment", "Standard & Poor's", "Stated Interest Rate", "Subordination Agent", "Taxes", "Threshold Rating", "Transfer", "Trust Agreements", "Trustee" and "Written Notice". ARTICLE II AMOUNT AND TERMS OF THE COMMITMENT Section 2.01. The Advances. The Liquidity Provider hereby irrevocably agrees, on the terms and conditions hereinafter set forth, to make Advances to the Borrower from time to time on any Business Day during the period from the Effective Date until 12:00 Noon (New York City time) on the Expiry Date (unless the obligations of the Liquidity Provider shall be earlier terminated in accordance with the terms of Section 2.04(b)) in an aggregate amount at any time outstanding not to exceed the Maximum Commitment. Section 2.02. Making the Advances. (a) Interest Advances shall be made in one or more Borrowings by delivery to the Liquidity Provider of one or more written and completed Notices of Borrowing in substantially the form of Annex I attached hereto, signed by a Responsible Officer of the Borrower, in an amount not exceeding the Maximum Commitment at such time and shall be used solely for the payment when due of the interest on the Class B Certificates at the Stated Interest Rate therefor in accordance with Section 3.6(a) of the Intercreditor Agreement. Each Interest Advance made hereunder shall automatically reduce the Maximum Commitment and the amount available to be borrowed hereunder by subsequent Advances by the amount of such Interest Advance (subject to reinstatement as provided in the next sentence). Upon repayment to the Liquidity Provider in full of the amount of any Interest Advance made pursuant to this Section 2.02(a), together with accrued interest thereon (as provided herein), the Maximum Commitment shall be reinstated by the amount of such repaid Interest Advance; provided, however, that the 13 9 Maximum Commitment shall not be so reinstated at any time if (i) a Liquidity Event of Default shall have occurred and be continuing and (ii) there is a Performing Note Deficiency. (b) [Intentionally omitted] (c) A Downgrade Advance shall be made in a single Borrowing, as provided for in Section 3.6(c) of the Intercreditor Agreement, (i) upon a downgrading of the Guarantor's short-term unsecured debt rating issued by any Rating Agency below the applicable Threshold Rating or (ii) if the Guarantee Agreement ceases to be in full force and effect, becomes invalid or unenforceable or the Guarantor denies its liability thereunder (any such occurrence, a "Guarantee Event"), unless a Replacement Liquidity Facility to replace this Agreement shall have been previously delivered to the Borrower in accordance with said Section 3.6(c), by delivery to the Liquidity Provider of a written and completed Notice of Borrowing in substantially the form of Annex III attached hereto, signed by a Responsible Officer of the Borrower, in an amount equal to the Maximum Commitment at such time, and shall be used to fund the Class B Cash Collateral Account in accordance with said Section 3.6(c) and Section 3.6(f) of the Intercreditor Agreement. (d) A Final Advance shall be made in a single Borrowing upon the receipt by the Borrower of a Termination Notice from the Liquidity Provider pursuant to Section 6.01 hereof by delivery to the Liquidity Provider of a written and completed Notice of Borrowing in substantially the form of Annex IV attached hereto, signed by a Responsible Officer of the Borrower, in an amount equal to the Maximum Commitment at such time, and shall be used to fund the Class B Cash Collateral Account (in accordance with Section 3.6(i) of the Intercreditor Agreement) and Section 3.6(f) of the Intercreditor Agreement. (e) Each Borrowing shall be made on notice in writing (a "Notice of Borrowing") in substantially the form required by Section 2.02(a), 2.02(c) or 2.02(d), as the case may be, given by the Borrower to the Liquidity Provider. If a Notice of Borrowing is delivered by the Borrower in respect of any Borrowing no later than 12:00 Noon (New York City time) on a Business Day, upon satisfaction of the conditions precedent set forth in Section 4.02 with respect to a requested Borrowing, the Liquidity Provider shall make available to the Borrower, in accordance with its payment instructions, the amount of such Borrowing in U.S. dollars and immediately available funds, before 12:00 Noon (New York City time) on the first Business Day next following the day of receipt of such Notice of Borrowing or on such later Business Day specified in such Notice of Borrowing. If a Notice of Borrowing is delivered by the Borrower in respect of any Borrowing after 12:00 Noon (New York City time) on a Business Day, upon satisfaction of the conditions precedent set forth in Section 4.02 with respect to a requested Borrowing, the Liquidity Provider shall make available to the Borrower, in accordance with its payment instructions, the amount of such Borrowing in U.S. dollars and immediately available funds, before 12:00 Noon (New York City time) on the second Business Day next following the day of receipt of such Notice 14 10 of Borrowing or on such later Business Day specified by the Borrower in such Notice of Borrowing. Payments of proceeds of a Borrowing shall be made by wire transfer of immediately available funds to the Borrower in accordance with such wire transfer instructions as the Borrower shall furnish from time to time to the Liquidity Provider for such purpose. Each Notice of Borrowing shall be irrevocable and binding on the Borrower. (f) Upon the making of any Advance requested pursuant to a Notice of Borrowing, in accordance with the Borrower's payment instructions, the Liquidity Provider shall be fully discharged of its obligation hereunder with respect to such Notice of Borrowing, and the Liquidity Provider shall not thereafter be obligated to make any further Advances hereunder in respect of such Notice of Borrowing to the Borrower or to any other Person. Following the making of any Advance pursuant to Section 2.02(c) or (d) hereof to fund the Class B Cash Collateral Account, the Liquidity Provider shall have no interest in or rights to the Class B Cash Collateral Account, such Advance or any other amounts from time to time on deposit in the Class B Cash Collateral Account; provided that the foregoing shall not affect or impair the obligations of the Subordination Agent to make the distributions contemplated by Section 3.6(e) or (f) of the Intercreditor Agreement. By paying to the Borrower proceeds of Advances requested by the Borrower in accordance with the provisions of this Agreement, the Liquidity Provider makes no representation as to, and assumes no responsibility for, the correctness or sufficiency for any purpose of the amount of the Advances so made and requested. Section 2.03. Fees. The Borrower agrees to pay to the Liquidity Provider the fees set forth in the MSCS Fee Letter. Section 2.04. Reduction or Termination of the Maximum Commitment. (a) Automatic Reduction. Promptly following each date on which the Required Amount is reduced as a result of a reduction in the Pool Balance of the Class B Certificates or otherwise, the Maximum Commitment shall automatically be reduced to an amount equal to such reduced Required Amount (as calculated by the Borrower). The Borrower shall give notice of any such automatic reduction of the Maximum Commitment to the Liquidity Provider within two Business Days thereof. The failure by the Borrower to furnish any such notice shall not affect such automatic reduction of the Maximum Commitment. (b) Termination. Upon the making of any Provider Advance or Final Advance hereunder or the occurrence of the Termination Date, the obligation of the Liquidity Provider to make further Advances hereunder shall automatically and irrevocably terminate, and the Borrower shall not be entitled to request any further Borrowing hereunder. Section 2.05. Repayments of Interest Advances or the Final Advance. Subject to Sections 2.06, 2.07 and 2.09 hereof, the Borrower hereby agrees, without notice of an Advance or demand for repayment from the Liquidity Provider (which notice and 15 11 demand are hereby waived by the Borrower), to pay, or to cause to be paid, to the Liquidity Provider on each date on which the Liquidity Provider shall make an Interest Advance or the Final Advance, an amount equal to (a) the amount of such Advance (any such Advance, until repaid, is referred to herein as an "Unpaid Advance"), plus (b) interest on the amount of each such Unpaid Advance as provided in Section 3.07 hereof; provided that if (i) the Liquidity Provider shall make a Provider Advance at any time after making one or more Interest Advances which shall not have been repaid in accordance with this Section 2.05 or (ii) this Liquidity Facility shall become a Downgraded Facility at any time when unreimbursed Interest Advances have reduced the Maximum Commitment to zero, then such Interest Advances shall cease to constitute Unpaid Advances and shall be deemed to have been changed into an Applied Downgrade Advance for all purposes of this Agreement (including, without limitation, for the purpose of determining when such Interest Advance is required to be repaid to the Liquidity Provider in accordance with Section 2.06 and for the purposes of Section 2.06(b)). The Borrower and the Liquidity Provider agree that the repayment in full of each Interest Advance and Final Advance on the date such Advance is made is intended to be a contemporaneous exchange for new value given to the Borrower by the Liquidity Provider. Section 2.06. Repayments of Provider Advances. (a) Amounts advanced hereunder in respect of a Provider Advance shall be deposited in the Class B Cash Collateral Account, invested and withdrawn from the Class B Cash Collateral Account as set forth in Sections 3.6(c), (d) and (f) of the Intercreditor Agreement. The Borrower agrees to pay to the Liquidity Provider, on each Regular Distribution Date, commencing on the first Regular Distribution Date after the making of a Provider Advance, interest on the principal amount of any such Provider Advance as provided in Section 3.07; provided, however, that amounts in respect of a Provider Advance withdrawn from the Class B Cash Collateral Account for the purpose of paying interest on the Class B Certificates in accordance with Section 3.6(f) of the Intercreditor Agreement (the amount of any such withdrawal being an "Applied Provider Advance") shall thereafter (subject to Section 2.06(b)) be treated as an Interest Advance under this Agreement for purposes of determining the Applicable Liquidity Rate for interest payable thereon; provided further, however, that if, following the making of a Provider Advance, the Liquidity Provider delivers a Termination Notice to the Borrower pursuant to Section 6.01 hereof, such Provider Advance shall thereafter be treated as a Final Advance under this Agreement for purposes of determining the Applicable Liquidity Rate for interest payable thereon. Subject to Sections 2.07 and 2.09 hereof, immediately upon the withdrawal of any amounts from the Class B Cash Collateral Account on account of a reduction in the Required Amount, the Borrower shall repay to the Liquidity Provider a portion of the Provider Advances in a principal amount equal to such reduction, plus interest on the principal amount prepaid as provided in Section 3.07 hereof. (b) At any time when an Applied Provider Advance (or any portion thereof) is outstanding, upon the deposit in the Class B Cash Collateral Account of any 16 12 amount pursuant to clause "third" of Section 2.4(b) of the Intercreditor Agreement, clause "third" of Section 3.2 of the Intercreditor Agreement or clause "fourth" of Section 3.3 of the Intercreditor Agreement (any such amount being a "Replenishment Amount") for the purpose of replenishing or increasing the balance thereof up to the Required Amount at such time, (i) the aggregate outstanding principal amount of all Applied Provider Advances (and of Provider Advances treated as an Interest Advance for purposes of determining the Applicable Liquidity Rate for interest payable thereon) shall be automatically reduced by the amount of such Replenishment Amount and (ii) the aggregate outstanding principal amount of all Unapplied Provider Advances shall be automatically increased by the amount of such Replenishment Amount. (c) Upon the provision of a Replacement Liquidity Facility in replacement of this Agreement in accordance with Section 3.6(e) of the Intercreditor Agreement, amounts remaining on deposit in the Class B Cash Collateral Account after giving effect to any Applied Provider Advance on the date of such replacement shall be reimbursed to the Liquidity Provider, but only to the extent such amounts are necessary to repay in full to the Liquidity Provider all amounts owing to it hereunder. Section 2.07. Payments to the Liquidity Provider Under the Intercreditor Agreement. In order to provide for payment or repayment to the Liquidity Provider of any amounts hereunder, the Intercreditor Agreement provides that amounts available and referred to in Articles II and III of the Intercreditor Agreement, to the extent payable to the Liquidity Provider pursuant to the terms of the Intercreditor Agreement (including, without limitation, Section 3.6(f) of the Intercreditor Agreement), shall be paid to the Liquidity Provider in accordance with the terms thereof. Amounts so paid to the Liquidity Provider shall be applied by the Liquidity Provider to Liquidity Obligations then due and payable in accordance with the Intercreditor Agreement or, if not provided for in the Intercreditor Agreement, then in such manner as the Liquidity Provider shall deem appropriate. Section 2.08. Book Entries. The Liquidity Provider shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower resulting from Advances made from time to time and the amounts of principal and interest payable hereunder and paid from time to time in respect thereof; provided, however, that the failure by the Liquidity Provider to maintain such account or accounts shall not affect the obligations of the Borrower in respect of Advances. Section 2.09. Payments from Available Funds Only. All payments to be made by the Borrower under this Agreement shall be made only from the amounts that constitute Scheduled Payments, Special Payments or payments under Section 8.1 or 9.1, as the case may be, of the Participation Agreements and Section 6 of the Note Purchase Agreement and only to the extent that the Borrower shall have sufficient income or proceeds therefrom to enable the Borrower to make payments in accordance with the terms hereof 17 13 after giving effect to the priority of payments provisions set forth in the Intercreditor Agreement. The Liquidity Provider agrees that it will look solely to such amounts to the extent available for distribution to it as provided in the Intercreditor Agreement and this Agreement and that the Borrower, in its individual capacity, is not personally liable to it for any amounts payable or liability under this Agreement except as expressly provided in this Agreement, the Intercreditor Agreement or any Participation Agreement. Amounts on deposit in the Class B Cash Collateral Account shall be available to the Borrower to make payments under this Agreement only to the extent and for the purposes expressly contemplated in Section 3.6(f) of the Intercreditor Agreement. Section 2.10. [Intentionally omitted] ARTICLE III OBLIGATIONS OF THE BORROWER Section 3.01. Increased Costs. The Borrower shall pay to the Liquidity Provider from time to time such amounts as may be necessary to compensate the Liquidity Provider for any increased costs incurred by the Liquidity Provider which are attributable to its making or maintaining any LIBOR Advances hereunder or its obligation to make any such Advances hereunder, or any reduction in any amount receivable by the Liquidity Provider under this Agreement or the Intercreditor Agreement in respect of any such Advances or such obligation (such increases in costs and reductions in amounts receivable being herein called "Additional Costs"), resulting from any change after the date of this Agreement in U.S. federal, state, municipal, or foreign laws or regulations which changes the basis of taxation of any amounts payable to the Liquidity Provider under this Agreement in respect of any such Advances (other than Excluded Taxes). The Liquidity Provider agrees to use reasonable efforts (consistent with applicable legal and regulatory restrictions) to change the jurisdiction of its Lending Office if making such change would avoid the need for, or reduce the amount of, any amount payable under this Section that may thereafter accrue and would not, in the reasonable judgment of the Liquidity Provider, be otherwise disadvantageous to the Liquidity Provider. The Liquidity Provider will notify the Borrower of any event occurring after the date of this Agreement that will entitle the Liquidity Provider to compensation pursuant to this Section 3.01 as promptly as practicable after it obtains knowledge thereof and determines to request such compensation, which notice shall describe in reasonable detail the calculation of the amounts owed under this Section. Determinations by the Liquidity Provider for purposes of this Section 3.01 of the effect of any Regulatory Change on its costs of making or maintaining Advances or on amounts receivable by it in respect of Advances, and of the additional amounts required to compensate the Liquidity Provider in respect of any Additional Costs, shall be prima facie evidence of the amount owed under this Section. 18 14 Section 3.02. Capital Adequacy. If (1) the adoption, after the date hereof, of any applicable governmental law, rule or regulation regarding capital adequacy, (2) any change, after the date hereof, in the interpretation or administration of any such law, rule or regulation by any central bank or other governmental authority charged with the interpretation or administration thereof or (3) compliance by the Liquidity Provider or any corporation controlling the Liquidity Provider with any applicable guideline or request of general applicability, issued after the date hereof, by any central bank or other governmental authority (whether or not having the force of law) that constitutes a change of the nature described in clause (2), has the effect of requiring an increase in the amount of capital required to be maintained by the Liquidity Provider or any corporation controlling the Liquidity Provider, and such increase is based upon the Liquidity Provider's obligations hereunder and other similar obligations, the Borrower shall pay to the Liquidity Provider from time to time such additional amount or amounts as are necessary to compensate the Liquidity Provider for such portion of such increase as shall be reasonably allocable to the Liquidity Provider's obligations to the Borrower hereunder. The Liquidity Provider agrees to use reasonable efforts (consistent with applicable legal and regulatory restrictions) to change the jurisdiction of its Lending Office if making such change would avoid the need for, or reduce the amount of, any amount payable under this Section that may thereafter accrue and would not, in the reasonable judgment of the Liquidity Provider, be otherwise materially disadvantageous to the Liquidity Provider. The Liquidity Provider will notify the Borrower of any event occurring after the date of this Agreement that will entitle the Liquidity Provider to compensation pursuant to this Section 3.02 as promptly as practicable after it obtains knowledge thereof and determines to request such compensation, which notice shall describe in reasonable detail the calculation of the amounts owed under this Section. Determinations by the Liquidity Provider for purposes of this Section 3.02 of the effect of any increase in the amount of capital required to be maintained by the bank and of the amount allocable to the Liquidity Provider's obligations to the Borrower hereunder shall be prima facie evidence of the amounts owed under this Section. Section 3.03. Payments Free of Deductions. All payments made by the Borrower under this Agreement shall be made free and clear of, and without reduction for or on account of, any present or future stamp or other taxes, levies, imposts, duties, charges, fees, deductions, withholdings, restrictions or conditions of any nature whatsoever now or hereafter imposed, levied, collected, withheld or assessed, excluding Excluded Taxes (such non-excluded taxes being referred to herein, collectively, as "Non-Excluded Taxes" and, individually, as a "Non-Excluded Tax"). If any Non-Excluded Taxes are required to be withheld from any amounts payable to the Liquidity Provider under this Agreement, the amounts so payable to the Liquidity Provider shall be increased to the extent necessary to yield to the Liquidity Provider (after payment of all Non-Excluded Taxes) interest or any other such amounts payable under this Agreement at the rates or in the amounts specified in 19 15 this Agreement. The Liquidity Provider agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Lending Office if making such change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the reasonable judgment of the Liquidity Provider, be otherwise disadvantageous to the Liquidity Provider. From time to time upon the reasonable request of the Borrower, the Liquidity Provider agrees to provide to the Borrower two original Internal Revenue Service Forms 1001 or 4224, as appropriate, or any successor or other form prescribed by the Internal Revenue Service, certifying that the Liquidity Provider is exempt from or entitled to a reduced rate of United States withholding tax on payments pursuant to this Agreement. (b) All payments (including, without limitation, Advances) made by the Liquidity Provider under this Agreement shall be made free and clear of, and without reduction for or on account of, any Taxes. If any Taxes are required to be withheld or deducted from any amounts payable to the Borrower under this Agreement, the Liquidity Provider shall (i) within the time prescribed therefor by applicable law pay to the appropriate governmental or taxing authority the full amount of any such Taxes (and any additional Taxes in respect of the payment required under clause (ii) hereof) and make such reports or returns in connection therewith at the time or times and in the manner prescribed by applicable law, and (ii) pay to the Borrower an additional amount which (after deduction of all such Taxes) will be sufficient to yield to the Borrower the full amount which would have been received by it had no such withholding or deduction been made. Within 30 days after the date of each payment hereunder, the Liquidity Provider shall furnish to the Borrower the original or a certified copy of (or other documentary evidence of) the payment of the Taxes applicable to such payment. Section 3.04. Payments. The Borrower shall make or cause to be made each payment to the Liquidity Provider under this Agreement so as to cause the same to be received by the Liquidity Provider not later than 1:00 P.M. (New York City time) on the day when due. The Borrower shall make all such payments in lawful money of the United States of America, to the Liquidity Provider in immediately available funds, by wire transfer to Citibank, N.A., New York, NY, ABA# 021000089, Account Name: Morgan Stanley Capital Services, Inc., Account # 4072-4601, Reference: Atlas Air, Inc., 1998-1B. Section 3.05. Computations. All computations of interest based on the Base Rate shall be made on the basis of a year of 365 or 366 days, as the case may be, and all computations of interest based on the LIBOR Rate shall be made on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest is payable. Section 3.06. Payment on Non-Business Days. Whenever any payment to be made hereunder shall be stated to be due on a day other than a Business Day, such payment 20 16 shall be made on the next succeeding Business Day and no additional interest shall be due as a result (and if so made, shall be deemed to have been made when due). If any payment in respect of interest on an Advance is so deferred to the next succeeding Business Day, such deferral shall not delay the commencement of the next Interest Period for such Advance (if such Advance is a LIBOR Advance) or reduce the number of days for which interest will be payable on such Advance on the next interest payment date for such Advance. Section 3.07. Interest. (a) Subject to Section 2.09, the Borrower shall pay, or shall cause to be paid, without duplication, interest on (i) the unpaid principal amount of each Advance from and including the date of such Advance (or, in the case of an Applied Provider Advance, from and including the date on which the amount thereof was withdrawn from the Class B Cash Collateral Account to pay interest on the Class B Certificates) to but excluding the date such principal amount shall be paid in full (or, in the case of an Applied Provider Advance, the date on which the Class B Cash Collateral Account is fully replenished in respect of such Advance) and (ii) any other amount due hereunder (whether fees, commissions, expenses or other amounts or, to the extent permitted by law, installments of interest on Advances or any such other amount) which is not paid when due (whether at stated maturity, by acceleration or otherwise) from and including the due date thereof to but excluding the date such amount is paid in full, in each such case, at a fluctuating interest rate per annum for each day equal to the Applicable Liquidity Rate (as defined below) for such Advance or such other amount as in effect for such day, but in no event at a rate per annum greater than the maximum rate permitted by applicable law; provided, however, that, if at any time the otherwise applicable interest rate as set forth in this Section 3.07 shall exceed the maximum rate permitted by applicable law, then any subsequent reduction in such interest rate will not reduce the rate of interest payable pursuant to this Section 3.07 below the maximum rate permitted by applicable law until the total amount of interest accrued equals the amount of interest that would have accrued if such otherwise applicable interest rate as set forth in this Section 3.07 had at all times been in effect. (b) Except as provided in clause (e) below, each Advance will be either a Base Rate Advance or a LIBOR Advance as provided in this Section. Each such Advance will be a Base Rate Advance for the period from the date of its borrowing to (but excluding) the third Business Day following the Liquidity Provider's receipt of the Notice of Borrowing for such Advance. Thereafter, such Advance shall be a LIBOR Advance; provided that the Borrower (at the direction of the Controlling Party), so long as the Liquidity Provider is not the Controlling Party) may (x) convert the Final Advance into a Base Rate Advance on the last day of an Interest Period for such Advance by giving the Liquidity Provider no less than four Business Days' prior written notice of such election or (y) elect to maintain the Final Advance as a Base Rate Advance by not requesting a conversion of the Final Advance to a LIBOR Advance under Clause (5) of the applicable Notice of Borrowing. 21 17 (c) Each LIBOR Advance shall bear interest during each Interest Period at a rate per annum equal to the LIBOR Rate for such Interest Period plus the Applicable Margin for such LIBOR Advance, payable in arrears on the last day of such Interest Period and, in the event of the payment of principal of such LIBOR Advance on a day other than such last day, on the date of such payment (to the extent of interest accrued on the amount of principal repaid). (d) Each Base Rate Advance shall bear interest at a rate per annum equal to the Base Rate plus the Applicable Margin for such Base Rate Advance, payable in arrears on each Regular Distribution Date and, in the event of the payment of principal of such Base Rate Advance on a day other than a Regular Distribution Date, on the date of such payment (to the extent of interest accrued on the amount of principal repaid). (e) Each Unapplied Downgrade Advance (i) during the period from and including the date of the making of such Unapplied Downgrade Advance through but excluding the Expiry Date (or, if earlier, the date of repayment thereof or of conversion thereof into a Final Advance), shall bear interest at a rate per annum equal to the LIBOR Rate for such Interest Period plus 0.40% on the amount of such Unapplied Downgrade Advance from time to time during such period, payable in arrears on each Regular Distribution Date and (ii) thereafter, shall be a LIBOR Advance and shall bear interest in accordance with clause (c) above. (f) [Intentionally omitted] (g) Each amount not paid when due hereunder (whether fees, commissions, expenses or other amounts or, to the extent permitted by applicable law, installments of interest on Advances but excluding Advances) shall bear interest at a rate per annum equal to the Base Rate plus 2.00% until paid. (h) Each change in the Base Rate shall become effective immediately. The rates of interest specified in this Section 3.07 with respect to any Advance or other amount shall be referred to as the "Applicable Liquidity Rate". Section 3.08. Replacement of Borrower. From time to time and subject to the successor Borrower's meeting the eligibility requirements set forth in Section 6.9 of the Intercreditor Agreement applicable to the Subordination Agent, upon the effective date and time specified in a written and completed Notice of Replacement Subordination Agent in substantially the form of Annex V attached hereto (a "Notice of Replacement Subordination Agent") delivered to the Liquidity Provider by the then Borrower, the successor Borrower designated therein shall be substituted for as the Borrower for all purposes hereunder. 22 18 Section 3.09. Funding Loss Indemnification. The Borrower shall pay to the Liquidity Provider, upon the request of the Liquidity Provider, such amount or amounts as shall be sufficient (in the reasonable opinion of the Liquidity Provider) to compensate it for any loss, cost, or expense incurred by reason of the liquidation or redeployment of deposits or other funds acquired by the Liquidity Provider to fund or maintain any LIBOR Advance (but excluding loss of anticipated profits) incurred as a result of: (1) Any repayment of a LIBOR Advance on a date other than the last day of the Interest Period for such Advance; or (2) Any failure by the Borrower to borrow a LIBOR Advance on the date for borrowing specified in the relevant notice under Section 2.02. Section 3.10. Illegality. Notwithstanding any other provision in this Agreement, if any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the Liquidity Provider (or its Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for the Liquidity Provider (or its Lending Office) to maintain or fund its LIBOR Advances, then upon notice to the Borrower by the Liquidity Provider, the outstanding principal amount of the LIBOR Advances shall be converted to Base Rate Advances (a) immediately upon demand of the Liquidity Provider, if such change or compliance with such request, in the judgment of the Liquidity Provider, requires immediate repayment; or (b) at the expiration of the last Interest Period to expire before the effective date of any such change or request. ARTICLE IV CONDITIONS PRECEDENT Section 4.01. Conditions Precedent to Effectiveness of Section 2.01. Section 2.01 of this Agreement shall become effective on and as of the first date (the "Effective Date") on which the following conditions precedent have been satisfied or waived: (a) The Liquidity Provider shall have received on or before the Closing Date each of the following, and in the case of each document delivered pursuant to paragraphs (i), (ii) and (iii), each in form and substance satisfactory to the Liquidity Provider: (i) This Agreement duly executed on behalf of the Borrower; 23 19 (ii) The Intercreditor Agreement duly executed on behalf of each of the parties thereto; (iii) Fully executed copies of each of the Operative Agreements executed and delivered on or before the Closing Date (other than this Agreement and the Intercreditor Agreement); (iv) A copy of the Offering Memorandum and specimen copies of the Class B Certificates; (v) An executed copy of each document, instrument, certificate and opinion delivered on or before the Closing Date pursuant to the Class B Trust Agreement, the Intercreditor Agreement and the other Operative Agreements (in the case of each such opinion, other than the opinion of counsel for the Placement Agents, either addressed to the Liquidity Provider or accompanied by a letter from the counsel rendering such opinion to the effect that the Liquidity Provider is entitled to rely on such opinion as of its date as if it were addressed to the Liquidity Provider); (vi) Evidence that there shall have been made and shall be in full force and effect, all filings, recordings and/or registrations, and there shall have been given or taken any notice or other similar action as may be reasonably necessary or, to the extent reasonably requested by the Liquidity Provider, reasonably advisable, in order to establish, perfect, protect and preserve the right, title and interest, remedies, powers, privileges, liens and security interests of, or for the benefit of, the Trustees, the Borrower and the Liquidity Provider created by the Operative Agreements executed and delivered on or prior to the Closing Date; (vii) An agreement from Atlas, pursuant to which (i) Atlas agrees to provide copies of quarterly financial statements and audited annual financial statements to the Liquidity Provider, and such other information as the Liquidity Provider shall reasonably request with respect to the transactions contemplated by the Operative Agreements, in each case, only to the extent that Atlas is obligated to provide such information pursuant to Section 8.2.1 of the Leases (related to Leased Aircraft) or the corresponding section of the Indentures (related to Owned Aircraft) to the parties thereto and (ii) Atlas agrees to allow the Liquidity Provider to inspect Atlas's books and records regarding such transactions, and to discuss such transactions with officers and employees of Atlas; and (viii) Such other documents, instruments, opinions and approvals pertaining to the transactions contemplated hereby or by the other Operative Agreements as the Liquidity Provider shall have reasonably requested. 24 20 (b) The following statement shall be true on and as of the Effective Date: No event has occurred and is continuing, or would result from the entering into of this Agreement or the making of any Advance, which constitutes a Liquidity Event of Default. (c) The Liquidity Provider shall have received payment in full of all fees and other sums required to be paid to or for the account of the Liquidity Provider on or prior to the Effective Date. (d) All conditions precedent to the issuance of the Certificates under the Trust Agreements shall have been satisfied or waived, all conditions precedent to the effectiveness of the other Liquidity Facilities shall have been satisfied or waived, and all conditions precedent to the purchase of the Certificates by the Placement Agents under the Placement Agreement shall have been satisfied (unless any of such conditions precedent shall have been waived by the Placement Agents) . (e) The Borrower shall have received on or before the Closing Date each of the following: (i) The Guarantee Agreement, substantially in the form of Exhibit I hereto, duly executed on behalf of each of the parties thereto; (ii) A certificate, dated the date hereof, signed by a duly authorized representative of the Liquidity Provider, certifying that all conditions precedent to the effectiveness of Section 2.01 have been satisfied or waived. Section 4.02. Conditions Precedent to Borrowing. The obligation of the Liquidity Provider to make an Advance on the occasion of each Borrowing shall be subject to the conditions precedent that the Effective Date shall have occurred and, prior to the date of such Borrowing, the Borrower shall have delivered a Notice of Borrowing which conforms to the terms and conditions of this Agreement and has been completed as may be required by the relevant form of the Notice of Borrowing for the type of Advances requested. ARTICLE V COVENANTS Section 5.01. Affirmative Covenants of the Borrower. So long as any Advance shall remain unpaid or the Liquidity Provider shall have any Maximum Commitment hereunder or the Borrower shall have any obligation to pay any amount to the Liquidity Provider hereunder, the Borrower will, unless the Liquidity Provider shall otherwise consent in writing: 25 21 (a) Performance of This and Other Agreements. Punctually pay or cause to be paid all amounts payable by it under this Agreement and the other Operative Agreements and observe and perform in all material respects the conditions, covenants and requirements applicable to it contained in this Agreement and the other Operative Agreements. (b) Reporting Requirements. Furnish to the Liquidity Provider with reasonable promptness, such other information and data with respect to the transactions contemplated by the Operative Agreements as from time to time may be reasonably requested by the Liquidity Provider; and permit the Liquidity Provider, upon reasonable notice, to inspect the Borrower's books and records with respect to such transactions and to meet with officers and employees of the Borrower to discuss such transactions. (c) Certain Operative Agreements. Furnish to the Liquidity Provider with reasonable promptness such Operative Agreements entered into after the date hereof as from time to time may be reasonably requested by the Liquidity Provider. Section 5.02. Negative Covenants of the Borrower. So long as any Advance shall remain unpaid or the Liquidity Provider shall have any Maximum Commitment hereunder or the Borrower shall have any obligation to pay any amount to the Liquidity Provider hereunder, the Borrower will not appoint or permit or suffer to be appointed any successor Borrower without the prior written consent of the Liquidity Provider, which consent shall not be unreasonably withheld or delayed. ARTICLE VI LIQUIDITY EVENTS OF DEFAULT Section 6.01. Liquidity Events of Default. If (a) any Liquidity Event of Default has occurred and is continuing and (b) there is a Performing Note Deficiency, the Liquidity Provider may, in its discretion, deliver to the Borrower a Termination Notice, the effect of which shall be to cause (i) this Agreement to expire on the fifth Business Day after the date on which such Termination Notice is received by the Borrower, (ii) the Borrower to promptly request, and the Liquidity Provider to promptly make, a Final Advance in accordance with Section 2.02(d) hereof and Section 3.6(i) of the Intercreditor Agreement, (iii) all other outstanding Advances to be automatically converted into Final Advances for purposes of determining the Applicable Liquidity Rate for interest payable thereon, and (iv) subject to Sections 2.07 and 2.09 hereof, all Advances (including, without limitation, any Provider Advance and Applied Provider Advance), any accrued interest thereon and any 26 22 other amounts outstanding hereunder to become immediately due and payable to the Liquidity Provider. ARTICLE VII MISCELLANEOUS Section 7.01. Amendments, Etc., No amendment or waiver of any provision of this Agreement, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Liquidity Provider, and, in the case of an amendment or of a waiver by the Borrower, the Borrower, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Section 7.02. Notices, Etc. Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including telecopier and mailed or delivered or sent by telecopier): Borrower: WILMINGTON TRUST COMPANY One Rodney Square 1100 North Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Telecopy: (302) 651-8882 Liquidity Provider: MORGAN STANLEY CAPITAL SERVICES, INC. 1585 Broadway New York, NY 10036 Attention: Keith Amburgey Telecopy: (212) 761-0580 or, as to each of the foregoing, at such other address as shall be designated by such Person in a written notice to the others. All such notices and communications shall be effective (i) if given by telecopier, when transmitted to the telecopier number specified above, (ii) if given by mail, when deposited in the mails addressed as specified above, and (iii) if given by other means, when delivered at the address specified above, except that written notices to the Liquidity Provider pursuant to the provisions of Articles II and III hereof shall not be effective until received by the Liquidity Provider. A copy of all notices delivered hereunder 27 23 to either party shall in addition be delivered to each of the parties to the Participation Agreements at their respective addresses set forth therein. Section 7.03. No Waiver: Remedies. No failure on the part of the Liquidity Provider to exercise, and no delay in exercising, any right under this Agreement shall operate as a waiver thereof; nor shall any single or partial exercise of any right under this Agreement preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. Section 7.04. Further Assurances. The Borrower agrees to do such further acts and things and to execute and deliver to the Liquidity Provider such additional assignments, agreements, powers and instruments as the Liquidity Provider may reasonably require or deem advisable to carry into effect the purposes of this Agreement and the other Operative Agreements or to better assure and confirm unto the Liquidity Provider its rights, powers and remedies hereunder and under the other Operative Agreements. Section 7.05. Indemnification; Survival of Certain Provisions. The Liquidity Provider shall be indemnified hereunder to the extent and in the manner described in Section 9.1 of the Leased Aircraft Participation Agreement, Section 8.1 of the Owned Aircraft Participation Agreement and Section 6 of the Note Purchase Agreement. In addition, the Borrower agrees to indemnify, protect, defend and hold harmless the Liquidity Provider from, against and in respect of, and shall pay on demand, all Expenses of any kind or nature whatsoever (other than any Expenses of the nature described in Sections 3.01, 3.02 or 7.07 hereof or in the MSCS Fee Letter (regardless of whether indemnified against pursuant to said Sections or in such MSCS Fee Letter)), that may be imposed, incurred by or asserted against any Liquidity Indemnitee, in any way relating to, resulting from, or arising out of or in connection with any action, suit or proceeding by any third party against such Liquidity Indemnitee and relating to this Agreement, the MSCS Fee Letter, the Intercreditor Agreement or any Financing Agreement; provided, however, that the Borrower shall not be required to indemnify, protect, defend and hold harmless any Liquidity Indemnitee in respect of any Expense of such Liquidity Indemnitee (i) to the extent such Expense is attributable to the gross negligence or willful misconduct of such Liquidity Indemnitee or any other Liquidity Indemnitee, (ii) ordinary and usual operating overhead expense, or (iii) attributable to the failure by such Liquidity Indemnitee or any other Liquidity Indemnitee to perform or observe any agreement, covenant or condition on its part to be performed or observed in this Agreement, the Intercreditor Agreement, the MSCS Fee Letter or any other Operative Agreement to which it is a party. The indemnities contained in Section 9.1 or 8.1, as the case may be, of the Participation Agreements, and the provisions of Sections 3.01, 3.02, 3.03, 3.09, 7.05 and 7.07 hereof, shall survive the termination of this Agreement. 28 24 Section 7.06. Liability of the Liquidity Provider. (a) Neither the Liquidity Provider nor any of its officers, employees, directors or affiliates shall be liable or responsible for: (i) the use which may be made of the Advances or any acts or omissions of the Borrower or any beneficiary or transferee in connection therewith; (ii) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; or (iii) the making of Advances by the Liquidity Provider against delivery of a Notice of Borrowing and other documents which do not comply with the terms hereof; provided, however, that the Borrower shall have a claim against the Liquidity Provider, and the Liquidity Provider shall be liable to the Borrower, to the extent of any damages suffered by the Borrower which were the result of (A) the Liquidity Provider's willful misconduct or negligence in determining whether documents presented hereunder comply with the terms hereof, or (B) any breach by the Liquidity Provider of any of the terms of this Agreement, including, but not limited to, the Liquidity Provider's failure to make lawful payment hereunder after the delivery to it by the Borrower of a Notice of Borrowing strictly complying with the terms and conditions hereof. (b) Neither the Liquidity Provider nor any of its officers, employees, director or affiliates shall be liable or responsible in any respect for (i) any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with this Agreement or any Notice of Borrowing delivered hereunder, or (ii) any action, inaction or omission which may be taken by it in good faith, absent willful misconduct or negligence (in which event the extent of the Liquidity Provider's potential liability to the Borrower shall be limited as set forth in the immediately preceding paragraph), in connection with this Agreement or any Notice of Borrowing. Section 7.07. Costs, Expenses and Taxes. The Borrower agrees to pay, or cause to be paid (A) on the Effective Date and on such later date or dates on which the Liquidity Provider shall make demand, all reasonable out-of- pocket costs and expenses (including, without limitation, the reasonable fees and expenses of outside counsel for the Liquidity Provider) of the Liquidity Provider in connection with the preparation, negotiation, execution, delivery, filing and recording of this Agreement, any other Operative Agreement and any other documents which may be delivered in connection with this Agreement and (B) on demand, all reasonable costs and expenses (including reasonable counsel fees and expenses) of the Liquidity Provider in connection with (i) the enforcement of this Agreement or any other Operative Agreement, (ii) the modification or amendment of, or supplement to, this Agreement or any other Operative Agreement or such other documents which may be delivered in connection herewith or therewith (whether or not the same shall become effective) or (iii) any action or proceeding relating to any order, injunction, or other process or decree restraining or seeking to restrain the Liquidity Provider from paying any amount under this Agreement, the Intercreditor Agreement or any other Operative Agreement or otherwise affecting the application of funds in the Class B Cash Collateral Account. In 29 25 addition, the Borrower shall pay any and all recording, stamp and other similar taxes and fees payable or determined to be payable in connection with the execution, delivery, filing and recording of this Agreement, any other Operative Agreement and such other documents, and agrees to save the Liquidity Provider harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes or fees. Section 7.08. Binding Effect; Participations. (a) This Agreement shall be binding upon and inure to the benefit of the Borrower and the Liquidity Provider and their respective successors and assigns, except that neither the Liquidity Provider (except as otherwise provided in this Section 7.08) nor (except as contemplated by Section 3.08) the Borrower shall have the right to assign its rights or obligations hereunder or any interest herein without the prior written consent of the other party, subject to the requirements of Section 7.08(b). The Liquidity Provider may grant participations herein or in any of its rights hereunder (including, without limitation, funded participations and participations in rights to receive interest payments hereunder) and under the other Operative Agreements to such Persons as the Liquidity Provider may in its sole discretion select, subject to the requirements of Section 7.08(b). No such participation by the Liquidity Provider, however, will relieve the Liquidity Provider of its obligations hereunder. In connection with any participation or any proposed participation, the Liquidity Provider may disclose to the participant or the proposed participant any information that the Borrower is required to deliver or to disclose to the Liquidity Provider pursuant to this Agreement. The Borrower acknowledges and agrees that the Liquidity Provider's source of funds may derive in part from its participants (other than Atlas). Accordingly, references in this Agreement and the other Operative Agreements to determinations, reserve and capital adequacy requirements, increased costs, reduced receipts, additional amounts due pursuant to Section 3.03(a) and the like as they pertain to the Liquidity Provider shall be deemed also to include those of each of its participants (subject, in each case, to the maximum amount that would have been incurred by or attributable to the Liquidity Provider directly if the Liquidity Provider, rather than the participant, had held the interest participated). (b) If, pursuant to subsection (a) above, the Liquidity Provider sells any participation in this Agreement to any bank or other entity (each, a "Transferee"), then, concurrently with the effectiveness of such participation, the Transferee shall (i) represent to the Liquidity Provider (for the benefit of the Liquidity Provider and the Borrower) either (A) that it is incorporated under the laws of the United States or a state thereof or (B) that under applicable law and treaties, no taxes will be required to be withheld with respect to any payments to be made to such Transferee in respect of this Agreement, (ii) furnish to the Liquidity Provider and the Borrower either (x) a statement that it is incorporated under the laws of the United States or a state thereof or (y) if it is not so incorporated, two copies of a properly completed United States Internal Revenue Service Form 4224 or Form 1001, as appropriate, or other applicable form, certificate or document prescribed by the Internal 30 26 Revenue Service certifying, in each case, such Transferee's entitlement to a complete exemption from United States federal withholding tax in respect to any and all payments to be made hereunder, and (iii) agree (for the benefit of the Liquidity Provider and the Borrower) to provide the Liquidity Provider and the Borrower a new Form 4224 or Form 1001, as appropriate, (A) on or before the date that any such form expires or becomes obsolete or (B) after the occurrence of any event requiring a change in the most recent form previously delivered by it and prior to the immediately following due date of any payment by the Borrower hereunder, certifying in the case of a Form 1001 or Form 4224 that such Transferee is entitled to a complete exemption from United States federal withholding tax on payments under this Agreement. Unless the Borrower has received forms or other documents reasonably satisfactory to it (and required by applicable law) indicating that payments hereunder are not subject to United States federal withholding tax, the Borrower will withhold taxes as required by law from such payments at the applicable statutory rate. Section 7.09. Severability. Any provision of this Agreement which is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or nonauthorization without invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction. Section 7.10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. Section 7.11. Submission to Jurisdiction; Waiver of Jury Trial; Waiver of Immunity. (a) Each of the parties hereto hereby irrevocably and unconditionally: (i) submits for itself and its property in any legal action or proceeding relating to this Agreement or any other Operative Agreement, or for recognition and enforcement of any judgment in respect hereof or thereof, to the nonexclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and the appellate courts from any thereof; (ii) consents that any such action or proceeding may be brought in such courts, and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (iii) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially 31 27 similar form and mail), postage prepaid, to each party hereto at its address set forth in Section 7.02 hereof, or at such other address of which the Liquidity Provider shall have been notified pursuant thereto; and (iv) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction. (b) THE BORROWER AND THE LIQUIDITY PROVIDER EACH HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE RELATIONSHIP THAT IS BEING ESTABLISHED, including, without limitation, contract claims, tort claims, breach of duty claims and all other common law and statutory claims. The Borrower and the Liquidity Provider each warrant and represent that it has reviewed this waiver with its legal counsel, and that it knowingly and voluntarily waives its jury trial rights following consultation with such legal counsel. THIS WAIVER IS IRREVOCABLE, AND CANNOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. Section 7.12. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Agreement. Section 7.13. Entirety. This Agreement, the Intercreditor Agreement and the other Operative Agreements to which the Liquidity Provider is a party constitute the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior understandings and agreements of such parties. Section 7.14. Headings. Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. Section 7.15. Transfer. The Liquidity Provider hereby acknowledges and consents to the Transfer contemplated by the Assignment and Assumption Agreement. Section 7.16. LIQUIDITY PROVIDER's OBLIGATION TO MAKE ADVANCES. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE OBLIGATIONS OF THE LIQUIDITY PROVIDER TO MAKE ADVANCES 32 28 HEREUNDER, AND THE BORROWER'S RIGHTS TO DELIVER NOTICES OF BORROWING REQUESTING THE MAKING OF ADVANCES HEREUNDER, SHALL BE UNCONDITIONAL AND IRREVOCABLE, AND SHALL BE PAID OR PERFORMED, IN EACH CASE STRICTLY IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT. 33 29 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first set forth above. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Subordination Agent, as agent and trustee for the Class B Trust, as Borrower By: /s/ JAMES P. LAWLER --------------------------------- Name: JAMES P. LAWLER Title: Vice President MORGAN STANLEY CAPITAL SERVICES, INC., as Liquidity Provider By: /s/ --------------------------------- Name: Title: 34 Annex I to Revolving Credit Agreement INTEREST ADVANCE NOTICE OF BORROWING The undersigned, a duly authorized signatory of the undersigned borrower (the "Borrower"), hereby certifies to Morgan Stanley Capital Services, Inc. (the "Liquidity Provider"), with reference to the Revolving Credit Agreement (1998-lB) dated as of February 9, 1998, between the Borrower and the Liquidity Provider (the "Liquidity Agreement"; the terms defined therein and not otherwise defined herein being used herein as therein defined or referenced), that: (1) The Borrower is the Subordination Agent under the Intercreditor Agreement. (2) The Borrower is delivering this Notice of Borrowing for the making of an Interest Advance by the Liquidity Provider to be used, subject to clause (3)(v) below, for the payment of the interest on the Class B Certificates which was payable on _______________________ ________ (the "Distribution Date") in accordance with the terms and provisions of the Class B Trust Agreement and the Class B Certificates which Advance is requested to be made on __________, ____. (3) The amount of the Interest Advance requested hereby (i) is $ _______, to be applied in respect of the payment of the interest which was due and payable on the Class B Certificates on the Distribution Date, (ii) does not include any amount with respect to the payment of principal of, or premium on, the Class A Certificates, the Class B Certificates or the Class C Certificates, or interest on the Class A Certificates or the Class C Certificates, (iii) was computed in accordance with the provisions of the Class B Certificates, the Class B Trust Agreement and the Intercreditor Agreement (a copy of which computation is attached hereto as Schedule I), (iv) does not exceed the Maximum Commitment on the date hereof, (v) does not include any amount of interest which was due and payable on the Class B Certificates on such Distribution Date but which remains unpaid due to the failure of the Depositary to pay any amount of accrued interest on the Certificates of Deposit on such Distribution Date and (vi) has not been and is not the subject of a prior or contemporaneous Notice of Borrowing. (4) Upon receipt by or on behalf of the Borrower of the amount requested hereby, (a) the Borrower will apply the same in accordance with the terms of Section 3.6(b) of the Intercreditor Agreement, (b) no portion of such amount shall be applied by the Borrower for any other purpose and (c) no portion of such amount until so applied shall be commingled with other funds held by the Borrower. 35 I-2 The Borrower hereby acknowledges that, pursuant to the Liquidity Agreement, the making of the Interest Advance as requested by this Notice of Borrowing shall automatically reduce, subject to reinstatement in accordance with the terms of the Liquidity Agreement, the Maximum Commitment by an amount equal to the amount of the Interest Advance requested to be made hereby as set forth in clause (i) of paragraph (3) of this Certificate and such reduction shall automatically result in corresponding reductions in the amounts available to be borrowed pursuant to a subsequent Advance. IN WITNESS WHEREOF, the Borrower has executed and delivered this Notice of Borrowing as of the __ day of ________________, _____. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Subordination Agent, as Borrower By: --------------------------------- Name: Title: 36 SCHEDULE I TO INTEREST ADVANCE NOTICE OF BORROWING [Insert Copy of Computations in accordance with Interest Advance Notice of Borrowing] 37 Annex II to Revolving Credit Agreement DOWNGRADE ADVANCE NOTICE OF BORROWING The undersigned, a duly authorized signatory of the undersigned subordination agent (the "Borrower"), hereby certifies to Morgan Stanley Capital Services, Inc. (the "Liquidity Provider"), with reference to the Revolving Credit Agreement (1998-lB) dated as of February 9, 1998, between the Borrower and the Liquidity Provider (the "Liquidity Agreement"; the terms defined therein and not otherwise defined herein being used herein as therein defined or referenced), that: (1) The Borrower is the Subordination Agent under the Intercreditor Agreement. (2) The Borrower is delivering this Notice of Borrowing for the making of the Downgrade Advance by the Liquidity Provider to be used for the funding of the Class B Cash Collateral Account in accordance with Section 3.6(c) of the Intercreditor Agreement by reason of (i) the downgrading of the short-term unsecured debt rating of the Guarantor issued by any Rating Agency below the Threshold Rating or (ii) the occurrence of a Guarantee Event, which Advance is requested to be made on __________, ____. (3) The amount of the Downgrade Advance requested hereby (i) is $________.____, which equals the Maximum Commitment on the date hereof and is to be applied in respect of the funding of the Class B Cash Collateral Account in accordance with Section 3.6(c) of the Intercreditor Agreement, (ii) does not include any amount with respect to the payment of the principal of, or premium on, the Class B Certificates, or principal of, or interest or premium on, the Class A Certificates or the Class C Certificates, (iii) was computed in accordance with the provisions of the Class B Certificates, the Class B Trust Agreement and the Intercreditor Agreement (a copy of which computation is attached hereto as Schedule I), and (iv) has not been and is not the subject of a prior or contemporaneous Notice of Borrowing under the Liquidity Agreement. (4) Upon receipt by or on behalf of the Borrower of the amount requested hereby, (a) the Borrower will deposit such amount in the Class B Cash Collateral Account and apply the same in accordance with the terms of Section 3.6(c) of the Intercreditor Agreement, (b) no portion of such amount shall be applied by the Borrower for any other purpose and (c) no portion of such amount until so applied shall be commingled with other funds held by the Borrower. 38 II-2 The Borrower hereby acknowledges that, pursuant to the Liquidity Agreement, (A) the making of the Downgrade Advance as requested by this Notice of Borrowing shall automatically and irrevocably terminate the obligation of the Liquidity Provider to make further Advances under the Liquidity Agreement; and (B) following the making by the Liquidity Provider of the Downgrade Advance requested by this Notice of Borrowing, the Borrower shall not be entitled to request any further Advances under the Liquidity Agreement. IN WITNESS WHEREOF, the Borrower has executed and delivered this Notice of Borrowing as of the ___ day of _________________,____. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Subordination Agent, as Borrower By: --------------------------------- Name: Title: 39 SCHEDULE I TO DOWNGRADE ADVANCE NOTICE OF BORROWING [Insert Copy of computations in accordance with Downgrade Advance Notice of Borrowing] 40 Annex III to Revolving Credit Agreement FINAL ADVANCE NOTICE OF BORROWING The undersigned, a duly authorized signatory of the undersigned borrower (the "Borrower"), hereby certifies to Morgan Stanley Capital Services, Inc. (the "Liquidity Provider"), with reference to the Revolving Credit Agreement (1998-lB) dated as of February 9, 1998, between the Borrower and the Liquidity Provider (the "Liquidity Agreement"; the terms defined therein and not otherwise defined herein being used herein as therein defined or referenced), that: (1) The Borrower is the Subordination Agent under the Intercreditor Agreement. (2) The Borrower is delivering this Notice of Borrowing for the making of the Final Advance by the Liquidity Provider to be used for the funding of the Class B Cash Collateral Account in accordance with Section 3.6(i) of the Intercreditor Agreement by reason of the receipt by the Borrower of a Termination Notice from the Liquidity Provider with respect to the Liquidity Agreement, which Advance is requested to be made on (3) The amount of the Final Advance requested hereby (i) is $__________.__, which equals the Maximum Commitment on the date hereof and is to be applied in respect of the funding of the Class B Cash Collateral Account in accordance with Section 3.6(i) of the Intercreditor Agreement, (ii) does not include any amount with respect to the payment of principal of, or premium on, the Class B Certificates, or principal of, or interest or premium on, the Class A Certificates or the Class C Certificates, (iii) was computed in accordance with the provisions of the Class B Certificates, the Class B Trust Agreement and the Intercreditor Agreement (a copy of which computation is attached hereto as Schedule I), and (iv) has not been and is not the subject of a prior or contemporaneous Notice of Borrowing. (4) Upon receipt by or on behalf of the Borrower of the amount requested hereby, (a) the Borrower will deposit such amount in the Class B Cash Collateral Account and apply the same in accordance with the terms of Section 3.6(i) of the Intercreditor Agreement, (b) no portion of such amount shall be applied by the Borrower for any other purpose and (c) no portion of such amount until so applied shall be commingled with other funds held by the Borrower. (5) The Borrower hereby requests that the Advance requested hereby be a Base Rate Advance and that such Base Rate Advance be converted into a LIBOR Advance on the third Business Day following your receipt of this notice. 41 IV-2 The Borrower hereby acknowledges that, pursuant to the Liquidity Agreement, (A) the making of the Final Advance as requested by this Notice of Borrowing shall automatically and irrevocably terminate the obligation of the Liquidity Provider to make further Advances under the Liquidity Agreement; and (B) following the making by the Liquidity Provider of the Final Advance requested by this Notice of Borrowing, the Borrower shall not be entitled to request any further Advances under the Liquidity Agreement. IN WITNESS WHEREOF, the Borrower has executed and delivered this Notice of Borrowing as of the ___ day of ______________, ____. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Subordination Agent, as Borrower By: --------------------------------- Name: Title: 42 SCHEDULE I TO FINAL ADVANCE NOTICE OF BORROWING [Insert Copy of Computations in accordance with Final Advance Notice of Borrowing] 43 Annex IV to Revolving Credit Agreement NOTICE OF TERMINATION [Date] Wilmington Trust Company, as Subordination Agent, as Borrower One Rodney Square 1100 North Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Revolving Credit Agreement dated as of February 9, 1998, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the Atlas Air, Inc. Pass Through Trust, 1998-lB-[O][S], as Borrower, and Morgan Stanley Capital Services, Inc. (the "Liquidity Agreement") - -------------------------------------------------------------------------------- Ladies and Gentlemen: You are hereby notified that pursuant to Section 6.01 of the Liquidity Agreement, by reason of the occurrence of a Liquidity Event of Default and the existence of a Performing Note Deficiency (each as defined therein), we are giving this notice to you in order to cause (i) our obligations to make Advances (as defined therein) under such Liquidity Agreement to terminate on the fifth Business Day after the date on which you receive this notice and (ii) you to request a Final Advance under the Liquidity Agreement pursuant to Section 3.6(i) of the Intercreditor Agreement (as defined in the Liquidity Agreement) as a consequence of your receipt of this notice. 44 V-2 THIS NOTICE IS THE "NOTICE OF TERMINATION" PROVIDED FOR UNDER THE LIQUIDITY AGREEMENT. OUR OBLIGATIONS TO MAKE ADVANCES UNDER THE LIQUIDITY AGREEMENT WILL TERMINATE ON THE FIFTH BUSINESS DAY AFTER THE DATE ON WHICH YOU RECEIVE THIS NOTICE. Very truly yours, Morgan Stanley Capital Services, Inc., as Liquidity Provider By: ------------------------------------- Name: Title: By: ------------------------------------- Name: Title: cc: Wilmington Trust Company, as Class B Trustee 45 Annex V to Revolving Credit Agreement NOTICE OF REPLACEMENT SUBORDINATION AGENT [Date] Attention: Revolving Credit Agreement dated as of February 9, 1998, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the Atlas Air Pass Through Trust, 1998-lB-[O][S], as Borrower, and Morgan Stanley Capital Services, Inc. (the "Liquidity Agreement") - -------------------------------------------------------------------------------- Ladies and Gentlemen: For value received, the undersigned beneficiary hereby irrevocably transfers to: [Name of Transferee] [Address of Transferee] all rights and obligations of the undersigned as Borrower under the Liquidity Agreement referred to above. The transferee has succeeded the undersigned as Subordination Agent under the Intercreditor Agreement referred to in the first paragraph of the Liquidity Agreement, pursuant to the terms of Section 8.1 of the Intercreditor Agreement. By this transfer, all rights of the undersigned as Borrower under the Liquidity Agreement are transferred to the transferee and the transferee shall hereafter have the sole rights and obligations as Borrower thereunder. The undersigned shall pay any costs and expenses of such transfer, including, but not limited to, transfer taxes or governmental charges. 46 VI-2 We ask that this transfer be effective as of _______________, ____. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Subordination Agent, as Borrower By --------------------------------- Name: Title: 47 Exhibit I to Revolving Credit Agreement FORM OF GUARANTEE AGREEMENT EX-10.105 19 REVOLVING CREDIT AGREEMENT 1998-1C 1 EXHIBIT 10.105 EXECUTION COPY - -------------------------------------------------------------------------------- REVOLVING CREDIT AGREEMENT (1998-lC) Dated as of February 9, 1998 between WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Subordination Agent, as agent and trustee for the Atlas Air Pass Through Trust 1998-lC-0, as Borrower and MORGAN STANLEY CAPITAL SERVICES, INC., as Liquidity Provider - -------------------------------------------------------------------------------- Relating to Atlas Air Pass Through Trust 1998-lC-0 8.01% Atlas Air Pass Through Certificates, Series 1998-lC-0 2 TABLE OF CONTENTS ARTICLE I DEFINITIONS Section 1.01. Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE II AMOUNT AND TERMS OF THE COMMITMENT Section 2.01. The Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 2.02. Making the Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 2.03. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 2.04. Reduction or Termination of the Maximum Commitment . . . . . . . . . . . . . . . . . . . . . 10 Section 2.05. Repayments of Interest Advances or the Final Advance . . . . . . . . . . . . . . . . . . . . 11 Section 2.06. Repayments of Provider Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 2.07. Payments to the Liquidity Provider Under the Intercreditor Agreement . . . . . . . . . . . . 12 Section 2.08. Book Entries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 2.09. Payments from Available Funds Only . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 2.10. [Intentionally omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 ARTICLE III OBLIGATIONS OF THE BORROWER Section 3.01. Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 3.02. Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 3.03. Payments Free of Deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 3.04. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 3.05. Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 3.06. Payment on Non-Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 3.07. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 3.08. Replacement of Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 3.09. Funding Loss Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 3.10. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3 ARTICLE IV CONDITIONS PRECEDENT Section 4.01. Conditions Precedent to Effectiveness of Section 2.01 . . . . . . . . . . . . . . . . . . . . 19 Section 4.02. Conditions Precedent to Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 ARTICLE V COVENANTS Section 5.01. Affirmative Covenants of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Section 5.02. Negative Covenants of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 ARTICLE VI LIQUIDITY EVENTS OF DEFAULT Section 6.01. Liquidity Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 ARTICLE VII MISCELLANEOUS Section 7.01. Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 7.02. Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Section 7.03. No Waiver: Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Section 7.04. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 7.05. Indemnification; Survival of Certain Provisions . . . . . . . . . . . . . . . . . . . . . . . 24 Section 7.06. Liability of the Liquidity Provider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 7.07. Costs, Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 7.08. Binding Effect; Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Section 7.09. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Section 7.10. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Section 7.11. Submission to Jurisdiction; Waiver of Jury Trial; Waiver of Immunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Section 7.12. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 7.13. Entirety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 7.14. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 7.15. Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 7.16. LIQUIDITY PROVIDER's OBLIGATION TO MAKE ADVANCES . . . . . . . . . . . . . . . . . . . . . . 29
ii 4 ANNEX I Interest Advance Notice of Borrowing ANNEX II Downgrade Advance Notice of Borrowing ANNEX III Final Advance Notice of Borrowing ANNEX IV Notice of Termination ANNEX V Notice of Replacement Subordination Agent EXHIBIT I Form of Guarantee Agreement iii 5 REVOLVING CREDIT AGREEMENT This REVOLVING CREDIT AGREEMENT dated as of February 9, 1998, between WILMINGTON TRUST COMPANY, a Delaware corporation ("WTC"), not in its individual capacity but solely as Subordination Agent under the Intercreditor Agreement (each as defined below), as agent and trustee for the Class C Trust (as defined below) (the "Borrower"), and MORGAN STANLEY CAPITAL SERVICES, INC., a Delaware corporation ("MSCS" or the "Liquidity Provider"). W I T N E S S E T H: WHEREAS, pursuant to the Class C Trust Agreement (such term and all other capitalized terms used in these recitals having the meanings set forth or referred to in Section 1.01), the Class C Trust is issuing the Class C Certificates; WHEREAS, the Borrower, in order to support the timely payment of a portion of the interest on the Class C Certificates in accordance with their terms, has requested the Liquidity Provider to enter into this Agreement, providing in part for the Borrower to request in specified circumstances that Advances be made hereunder; and WHEREAS, the Liquidity Provider has requested Morgan Stanley, Dean Witter, Discover & Co. (the "Guarantor") to enter into a Guarantee Agreement, providing for the full and unconditional guarantee of the Liquidity Provider's obligations under this Agreement; NOW, THEREFORE, in consideration of the premises, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.01. Certain Defined Terms. (a) Definitions. As used in this Agreement and unless otherwise expressly indicated, or unless the context clearly requires otherwise, the following capitalized terms shall have the following respective meanings for all purposes of this Agreement: "Additional Cost" has the meaning assigned to such term in Section 3.01. "Advance" means an Interest Advance, a Final Advance, a Provider Advance, an Applied Provider Advance or an Unpaid Advance, as the case may be. 6 2 "Applicable Liquidity Rate" has the meaning assigned to such term in Section 3.07(h). "Applicable Margin" means (x) with respect to any Unpaid Advance or Applied Provider Advance, 1.75% and (y) with respect to any Unapplied Downgrade Advance, 0.40%. "Applied Downgrade Advance" has the meaning assigned to such term in Section 2.06(a). "Applied Provider Advance" has the meaning assigned to such term in Section 2.06(a). "Assignment and Assumption Agreement" means the Assignment and Assumption to be entered into between the Borrower and the trustee of the Successor Trust, substantially in the form of Exhibit E to the Class C Trust Agreement. "Base Rate" means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to (a) the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or if such rate is not so published for any day that is a Business Day, the average of the quotations for such day for such transactions received by the Liquidity Provider from three Federal funds brokers of recognized standing selected by it, plus (b) one-quarter of one percent (1/4 of 1%). "Base Rate Advance" means an Advance that bears interest at a rate based upon the Base Rate. "Borrower" has the meaning assigned to such term in the recital of parties to this Agreement. "Borrowing" means the making of Advances requested by delivery of a Notice of Borrowing. "Business Day" means any day other than a Saturday or Sunday or a day on which commercial banks are required or authorized to close in Denver, Colorado, Chicago, Illinois, New York, New York, or, so long as any Class C Certificate is outstanding, the city and state in which the Class C Trustee, the Borrower or any Loan Trustee maintains its Corporate Trust Office or receives or disburses funds, and, if the applicable Business Day relates to any Advance or other amount bearing interest 7 3 based on the LIBOR Rate, on which dealings are carried on in the London interbank market. "Certificates of Deposit" has the meaning assigned to such term in the Deposit Agreement. "Deposits" has the meaning assigned to such terms in the Deposit Agreement. "Depositary" has the meaning assigned to such term in the Deposit Agreement. "Deposit Agreement" means the Deposit Agreement dated February 9, 1998 between First Security Bank, National Association, as Escrow Agent and ABN AMRO Bank N.V., acting through its Chicago Branch, as Depositary, pertaining to the Class C Certificates, as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof. "Downgrade Advance" means an Advance made pursuant to Section 2.02(c). "Effective Date" has the meaning specified in Section 4.01. The delivery of the certificate of the Liquidity Provider contemplated by Section 4.01(e) shall be conclusive evidence that the Effective Date has occurred. "Excluded Taxes" means (i) taxes imposed on the overall net income of the Liquidity Provider or of its Lending Office by the jurisdiction where such Liquidity Provider's principal office or such Lending Office is located, and (ii) Excluded Withholding Taxes. "Excluded Withholding Taxes" means (i) withholding Taxes imposed by the United States except to the extent that such United States withholding Taxes are imposed as a result of any change in applicable law after the date hereof (excluding from change in applicable law for this purpose a change in an applicable treaty or other change in law affecting the applicability of a treaty), or in the case of a successor Liquidity Provider (including a transferee of an Advance) or Lending Office, after the date on which such successor Liquidity Provider obtains its interest or on which the Lending Office is changed, and (ii) any withholding Taxes imposed by the United States which are imposed or increased as a result of the Liquidity Provider failing to deliver to the Borrower any certificate or document (which certificate or document in the good faith judgment of the Liquidity Provider it is legally entitled to provide) which is reasonably requested by the Borrower to establish that payments under this Agreement are exempt from (or entitled to a reduced rate of) withholding Tax. 8 4 "Expenses" means liabilities, obligations, damages, settlements, penalties, claims, actions, suits, costs, expenses, and disbursements (including, without limitation, reasonable fees and disbursements of legal counsel and costs of investigation), provided that Expenses shall not include any Taxes. "Expiry Date" means July 2, 2011. "Final Advance" means an Advance made pursuant to Section 2.02 (d). "Intercreditor Agreement" means the Intercreditor Agreement dated the date hereof, among the Trustees, the Liquidity Provider, the liquidity provider under each Liquidity Facility (other than this Agreement) and the Subordination Agent, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Interest Advance" means an Advance made pursuant to Section 2.02(a). "Interest Period" means, with respect to any LIBOR Advance, each of the following periods: (i) the period beginning on the third Business Day following either (x) the Liquidity Provider's receipt of the Notice of Borrowing for such LIBOR Advance (or, in the case of an Unapplied Downgrade Advance, the period beginning on the Expiry Date) or (y) the withdrawal of funds from the Class C Cash Collateral Account for the purpose of paying interest on the Class C Certificates as contemplated by Section 2.06(a) hereof and, in either case, ending on the next Regular Distribution Date (or ending, in the case of an Interest Period applicable to any Unapplied Provider Advance, on the numerically corresponding day in the first or sixth calendar month after the first day of the applicable Interest Period and/or on the next Regular Distribution Date, as Atlas may select by providing notice thereof to the Borrower and the Liquidity Provider no later than three Business Days prior to the commencement of such Interest Period, provided that if Atlas shall not provide such a notice at least three Business Days prior to the commencement of such Interest Period, then Atlas shall be deemed to have selected an Interest Period ending on the next Regular Distribution Date); and (ii) each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the next Regular Distribution Date (or ending, in the case of an Interest Period applicable to any 9 5 Unapplied Provider Advance, on the numerically corresponding day in the first or sixth calendar month after the first day of the applicable Interest Period and/or on the next Regular Distribution Date, as Atlas may select by providing notice thereof to the Borrower and the Liquidity Provider no later than three Business Days prior to the commencement of such Interest Period, provided that if Atlas shall not provide such a notice at least three Business Days prior to the commencement of such Interest Period, then Atlas shall be deemed to have selected an Interest Period ending on the next Regular Distribution Date); provided, however, that (I) if an Unapplied Provider Advance which is a LIBOR Advance becomes an Applied Provider Advance, the Interest Period then applicable to such Unapplied Provider Advance shall be applicable to such Applied Provider Advance and (II) if (x) the Final Advance shall have been made, or (y) other outstanding Advances shall have been converted into the Final Advance, then the Interest Periods shall be successive periods of one month beginning on the third Business Day following the Liquidity Provider's receipt of the Notice of Borrowing for such Final Advance (in the case of clause (x) above) or the Regular Distribution Date following such conversion (in the case of clause (y) above). "Leased Aircraft Participation Agreement" means a participation agreement substantially in the form of Exhibit A-1 to the Note Purchase Agreement. "Lending Office" means the lending office of the Liquidity Provider presently located at New York, New York, or such other lending office as the Liquidity Provider from time to time shall notify the Borrower as its lending office hereunder; provided that the Liquidity Provider shall not change its Lending Office to a Lending Office outside the United States of America except in accordance with Section 3.01, 3.02 or 3.03 hereof. "LIBOR Advance" means an Advance bearing interest at a rate based upon the LIBOR Rate. "LIBOR Rate" means, with respect to any Interest Period, the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the rates per annum at which deposits in dollars are offered to major banks in the London interbank market at approximately 11:00 A.M. (London time) two Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Advance to which such Interest Period is to apply and for a period of time comparable to such Interest Period. 10 6 "Liquidity Event of Default" means the occurrence of either (a) the acceleration of all of the Equipment Notes or (b) an Atlas Bankruptcy Event. "Liquidity Indemnitee" means (i) the Liquidity Provider, (ii) the directors, officers, employees and agents of the Liquidity Provider, and (iii) the successors and permitted assigns of the persons described in clauses (i) and (ii), inclusive. "Liquidity Provider" has the meaning assigned to such term in the recital of parties to this Agreement. "Maximum Commitment" shall mean, subject to the proviso contained in the third sentence of Section 2.02(a), at any time of determination, (a) the Required Amount at such time less (b) the aggregate amount of each Interest Advance outstanding at such time; provided that following a Provider Advance or a Final Advance, the Maximum Commitment shall be zero. "Notice of Borrowing" has the meaning specified in Section 2.02(e). "Notice of Replacement Subordination Agent" has the meaning specified in Section 3.08. "Offering Memorandum" means the Offering Memorandum dated January 27, 1998 relating to the Certificates, as such Offering Memorandum may be amended or supplemented. "Owned Aircraft Participation Agreement" means a participation agreement substantially in the form of Exhibit C-1 to the Note Purchase Agreement. "Participation Agreements" means, collectively, the Leased Aircraft Participation Agreement and the Owned Aircraft Participation Agreement. "Performing Note Deficiency" means any time that less than 65% of the then aggregate outstanding principal amount of all Equipment Notes are Performing Equipment Notes. "Provider Advance" means a Downgrade Advance. "Regulatory Change" has the meaning assigned to such term in section 3.01. "Replenishment Amount" has the meaning assigned to such term in Section 2.06(b). 11 7 "Required Amount" means, for any day, the sum of the aggregate amount of interest, calculated at the rate per annum equal to the Stated Interest Rate for the Class C Certificates, that would be payable on the Class C Certificates on each of the three successive semiannual Regular Distribution Dates immediately following such day or, if such day is a Regular Distribution Date, on such day and the succeeding two semiannual Regular Distribution Dates, in each case calculated on the basis of the Pool Balance of the Class C Certificates on such day and without regard to expected future payments of principal on the Class C Certificates. "Successor Trust" means Atlas Air Pass Through Trust 1998-lC-S. "Termination Date" means the earliest to occur of the following: (i) the Expiry Date; (ii) the date on which the Borrower delivers to the Liquidity Provider a certificate, signed by a Responsible Officer of the Borrower, certifying that all of the Class C Certificates have been paid in full (or provision has been made for such payment in accordance with the Intercreditor Agreement and the Trust Agreements) or are otherwise no longer entitled to the benefits of this Agreement; (iii) the date on which the Borrower delivers to the Liquidity Provider a certificate, signed by a Responsible Officer of the Borrower, certifying that a Replacement Liquidity Facility has been substituted for this Agreement in full pursuant to Section 3.6(e) of the Intercreditor Agreement; (iv) the fifth Business Day following the receipt by the Borrower of a Termination Notice from the Liquidity Provider pursuant to Section 6.01 hereof; and (v) the date on which no Advance is or may (including by reason of reinstatement as herein provided) become available for a Borrowing hereunder. "Termination Notice" means the Notice of Termination substantially in the form of Annex IV to this Agreement. "Transferee" has the meaning assigned to such term in Section 7.08(b). "Unapplied Downgrade Advance" means any Downgrade Advance other than an Applied Downgrade Advance. "Unapplied Provider Advance" means any Provider Advance other than an Applied Provider Advance. "Unpaid Advance" has the meaning assigned to such term in Section 2.05. (b) Terms Defined in the Intercreditor Agreement. For all purposes of this Agreement, the following terms shall have the respective meanings assigned to such terms in the Intercreditor Agreement: 12 8 "Atlas", "Atlas Bankruptcy Event", "Certificates", "Class A Certificates", "Class B Certificates" "Class C Cash Collateral Account", "Class C Certificates", "Class C Certificateholders", "Class C Trust", "Class C Trust Agreement", "Class C Trustee", "Closing Date", "Controlling Party", "Corporate Trust Office", "Distribution Date", "Downgraded Facility", "Equipment Notes", "Final Maturity Date", "Financing Agreement", "Fitch", "Guarantee Event", "Guarantor", "Indenture", "Interest Payment Date", "Investment Earnings", "Liquidity Facility", "Liquidity Obligations", "Loan Trustee", "Moody's", "MSCS Fee Letter", "MSCS Liquidity Facilities", "Note Purchase Agreement", "Operative Agreements", "Performing Equipment Note", "Person", "Placement Agents", "Placement Agreement", "Pool Balance", "Rating Agency", "Ratings Confirmation", "Regular Distribution Date", "Replacement Liquidity Facility", "Responsible Officer", "Scheduled Payment", "Special Payment", "Standard & Poor's", "Stated Interest Rate", "Subordination Agent", "Taxes", "Threshold Rating", "Transfer", "Trust Agreements", "Trustee" and "Written Notice". ARTICLE II AMOUNT AND TERMS OF THE COMMITMENT Section 2.01. The Advances. The Liquidity Provider hereby irrevocably agrees, on the terms and conditions hereinafter set forth, to make Advances to the Borrower from time to time on any Business Day during the period from the Effective Date until 12:00 Noon (New York City time) on the Expiry Date (unless the obligations of the Liquidity Provider shall be earlier terminated in accordance with the terms of Section 2.04(b)) in an aggregate amount at any time outstanding not to exceed the Maximum Commitment. Section 2.02. Making the Advances. (a) Interest Advances shall be made in one or more Borrowings by delivery to the Liquidity Provider of one or more written and completed Notices of Borrowing in substantially the form of Annex I attached hereto, signed by a Responsible Officer of the Borrower, in an amount not exceeding the Maximum Commitment at such time and shall be used solely for the payment when due of the interest on the Class C Certificates at the Stated Interest Rate therefor in accordance with Section 3.6(a) of the Intercreditor Agreement. Each Interest Advance made hereunder shall automatically reduce the Maximum Commitment and the amount available to be borrowed hereunder by subsequent Advances by the amount of such Interest Advance (subject to reinstatement as provided in the next sentence). Upon repayment to the Liquidity Provider in full of the amount of any Interest Advance made pursuant to this Section 2.02(a), together with accrued interest thereon (as provided herein), the Maximum Commitment shall be reinstated by the amount of such repaid Interest Advance; provided, however, that the 13 9 Maximum Commitment shall not be so reinstated at any time if (i) a Liquidity Event of Default shall have occurred and be continuing and (ii) there is a Performing Note Deficiency. (b) [Intentionally omitted] (c) A Downgrade Advance shall be made in a single Borrowing, as provided for in Section 3.6(c) of the Intercreditor Agreement, (i) upon a downgrading of the Guarantor's short-term unsecured debt rating issued by any Rating Agency below the applicable Threshold Rating or (ii) if the Guarantee Agreement ceases to be in full force and effect, becomes invalid or unenforceable or the Guarantor denies its liability thereunder (any such occurrence, a "Guarantee Event"), unless a Replacement Liquidity Facility to replace this Agreement shall have been previously delivered to the Borrower in accordance with said Section 3.6(c), by delivery to the Liquidity Provider of a written and completed Notice of Borrowing in substantially the form of Annex III attached hereto, signed by a Responsible Officer of the Borrower, in an amount equal to the Maximum Commitment at such time, and shall be used to fund the Class C Cash Collateral Account in accordance with said Section 3.6(c) and Section 3.6(f) of the Intercreditor Agreement. (d) A Final Advance shall be made in a single Borrowing upon the receipt by the Borrower of a Termination Notice from the Liquidity Provider pursuant to Section 6.01 hereof by delivery to the Liquidity Provider of a written and completed Notice of Borrowing in substantially the form of Annex IV attached hereto, signed by a Responsible Officer of the Borrower, in an amount equal to the Maximum Commitment at such time, and shall be used to fund the Class C Cash Collateral Account (in accordance with Section 3.6(i) of the Intercreditor Agreement) and Section 3.6(f) of the Intercreditor Agreement. (e) Each Borrowing shall be made on notice in writing (a "Notice of Borrowing") in substantially the form required by Section 2.02(a), 2.02(c) or 2.02(d), as the case may be, given by the Borrower to the Liquidity Provider. If a Notice of Borrowing is delivered by the Borrower in respect of any Borrowing no later than 12:00 Noon (New York City time) on a Business Day, upon satisfaction of the conditions precedent set forth in Section 4.02 with respect to a requested Borrowing, the Liquidity Provider shall make available to the Borrower, in accordance with its payment instructions, the amount of such Borrowing in U.S. dollars and immediately available funds, before 12:00 Noon (New York City time) on the first Business Day next following the day of receipt of such Notice of Borrowing or on such later Business Day specified in such Notice of Borrowing. If a Notice of Borrowing is delivered by the Borrower in respect of any Borrowing after 12:00 Noon (New York City time) on a Business Day, upon satisfaction of the conditions precedent set forth in Section 4.02 with respect to a requested Borrowing, the Liquidity Provider shall make available to the Borrower, in accordance with its payment instructions, the amount of such Borrowing in U.S. dollars and immediately available funds, before 12:00 Noon (New York City time) on the second Business Day next following the day of receipt of such Notice 14 10 of Borrowing or on such later Business Day specified by the Borrower in such Notice of Borrowing. Payments of proceeds of a Borrowing shall be made by wire transfer of immediately available funds to the Borrower in accordance with such wire transfer instructions as the Borrower shall furnish from time to time to the Liquidity Provider for such purpose. Each Notice of Borrowing shall be irrevocable and binding on the Borrower. (f) Upon the making of any Advance requested pursuant to a Notice of Borrowing, in accordance with the Borrower's payment instructions, the Liquidity Provider shall be fully discharged of its obligation hereunder with respect to such Notice of Borrowing, and the Liquidity Provider shall not thereafter be obligated to make any further Advances hereunder in respect of such Notice of Borrowing to the Borrower or to any other Person. Following the making of any Advance pursuant to Section 2.02(c) or (d) hereof to fund the Class C Cash Collateral Account, the Liquidity Provider shall have no interest in or rights to the Class C Cash Collateral Account, such Advance or any other amounts from time to time on deposit in the Class C Cash Collateral Account; provided that the foregoing shall not affect or impair the obligations of the Subordination Agent to make the distributions contemplated by Section 3.6(e) or (f) of the Intercreditor Agreement. By paying to the Borrower proceeds of Advances requested by the Borrower in accordance with the provisions of this Agreement, the Liquidity Provider makes no representation as to, and assumes no responsibility for, the correctness or sufficiency for any purpose of the amount of the Advances so made and requested. Section 2.03. Fees. The Borrower agrees to pay to the Liquidity Provider the fees set forth in the MSCS Fee Letter. Section 2.04. Reduction or Termination of the Maximum Commitment. (a) Automatic Reduction. Promptly following each date on which the Required Amount is reduced as a result of a reduction in the Pool Balance of the Class C Certificates or otherwise, the Maximum Commitment shall automatically be reduced to an amount equal to such reduced Required Amount (as calculated by the Borrower). The Borrower shall give notice of any such automatic reduction of the Maximum Commitment to the Liquidity Provider within two Business Days thereof. The failure by the Borrower to furnish any such notice shall not affect such automatic reduction of the Maximum Commitment. (b) Termination. Upon the making of any Provider Advance or Final Advance hereunder or the occurrence of the Termination Date, the obligation of the Liquidity Provider to make further Advances hereunder shall automatically and irrevocably terminate, and the Borrower shall not be entitled to request any further Borrowing hereunder. Section 2.05. Repayments of Interest Advances or the Final Advance. Subject to Sections 2.06, 2.07 and 2.09 hereof, the Borrower hereby agrees, without notice of an Advance or demand for repayment from the Liquidity Provider (which notice and 15 11 demand are hereby waived by the Borrower), to pay, or to cause to be paid, to the Liquidity Provider on each date on which the Liquidity Provider shall make an Interest Advance or the Final Advance, an amount equal to (a) the amount of such Advance (any such Advance, until repaid, is referred to herein as an "Unpaid Advance"), plus (b) interest on the amount of each such Unpaid Advance as provided in Section 3.07 hereof; provided that if (i) the Liquidity Provider shall make a Provider Advance at any time after making one or more Interest Advances which shall not have been repaid in accordance with this Section 2.05 or (ii) this Liquidity Facility shall become a Downgraded Facility at any time when unreimbursed Interest Advances have reduced the Maximum Commitment to zero, then such Interest Advances shall cease to constitute Unpaid Advances and shall be deemed to have been changed into an Applied Downgrade Advance for all purposes of this Agreement (including, without limitation, for the purpose of determining when such Interest Advance is required to be repaid to the Liquidity Provider in accordance with Section 2.06 and for the purposes of Section 2.06(b)). The Borrower and the Liquidity Provider agree that the repayment in full of each Interest Advance and Final Advance on the date such Advance is made is intended to be a contemporaneous exchange for new value given to the Borrower by the Liquidity Provider. Section 2.06. Repayments of Provider Advances. (a) Amounts advanced hereunder in respect of a Provider Advance shall be deposited in the Class C Cash Collateral Account, invested and withdrawn from the Class C Cash Collateral Account as set forth in Sections 3.6(c), (d) and (f) of the Intercreditor Agreement. The Borrower agrees to pay to the Liquidity Provider, on each Regular Distribution Date, commencing on the first Regular Distribution Date after the making of a Provider Advance, interest on the principal amount of any such Provider Advance as provided in Section 3.07; provided, however, that amounts in respect of a Provider Advance withdrawn from the Class C Cash Collateral Account for the purpose of paying interest on the Class C Certificates in accordance with Section 3.6(f) of the Intercreditor Agreement (the amount of any such withdrawal being an "Applied Provider Advance") shall thereafter (subject to Section 2.06(b)) be treated as an Interest Advance under this Agreement for purposes of determining the Applicable Liquidity Rate for interest payable thereon; provided further, however, that if, following the making of a Provider Advance, the Liquidity Provider delivers a Termination Notice to the Borrower pursuant to Section 6.01 hereof, such Provider Advance shall thereafter be treated as a Final Advance under this Agreement for purposes of determining the Applicable Liquidity Rate for interest payable thereon. Subject to Sections 2.07 and 2.09 hereof, immediately upon the withdrawal of any amounts from the Class C Cash Collateral Account on account of a reduction in the Required Amount, the Borrower shall repay to the Liquidity Provider a portion of the Provider Advances in a principal amount equal to such reduction, plus interest on the principal amount prepaid as provided in Section 3.07 hereof. (b) At any time when an Applied Provider Advance (or any portion thereof) is outstanding, upon the deposit in the Class C Cash Collateral Account of any 16 12 amount pursuant to clause "third" of Section 2.4(b) of the Intercreditor Agreement, clause "third" of Section 3.2 of the Intercreditor Agreement or clause "fourth" of Section 3.3 of the Intercreditor Agreement (any such amount being a "Replenishment Amount") for the purpose of replenishing or increasing the balance thereof up to the Required Amount at such time, (i) the aggregate outstanding principal amount of all Applied Provider Advances (and of Provider Advances treated as an Interest Advance for purposes of determining the Applicable Liquidity Rate for interest payable thereon) shall be automatically reduced by the amount of such Replenishment Amount and (ii) the aggregate outstanding principal amount of all Unapplied Provider Advances shall be automatically increased by the amount of such Replenishment Amount. (c) Upon the provision of a Replacement Liquidity Facility in replacement of this Agreement in accordance with Section 3.6(e) of the Intercreditor Agreement, amounts remaining on deposit in the Class C Cash Collateral Account after giving effect to any Applied Provider Advance on the date of such replacement shall be reimbursed to the Liquidity Provider, but only to the extent such amounts are necessary to repay in full to the Liquidity Provider all amounts owing to it hereunder. Section 2.07. Payments to the Liquidity Provider Under the Intercreditor Agreement. In order to provide for payment or repayment to the Liquidity Provider of any amounts hereunder, the Intercreditor Agreement provides that amounts available and referred to in Articles II and III of the Intercreditor Agreement, to the extent payable to the Liquidity Provider pursuant to the terms of the Intercreditor Agreement (including, without limitation, Section 3.6(f) of the Intercreditor Agreement), shall be paid to the Liquidity Provider in accordance with the terms thereof. Amounts so paid to the Liquidity Provider shall be applied by the Liquidity Provider to Liquidity Obligations then due and payable in accordance with the Intercreditor Agreement or, if not provided for in the Intercreditor Agreement, then in such manner as the Liquidity Provider shall deem appropriate. Section 2.08. Book Entries. The Liquidity Provider shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower resulting from Advances made from time to time and the amounts of principal and interest payable hereunder and paid from time to time in respect thereof; provided, however, that the failure by the Liquidity Provider to maintain such account or accounts shall not affect the obligations of the Borrower in respect of Advances. Section 2.09. Payments from Available Funds Only. All payments to be made by the Borrower under this Agreement shall be made only from the amounts that constitute Scheduled Payments, Special Payments or payments under Section 8.1 or 9.1, as the case may be, of the Participation Agreements and Section 6 of the Note Purchase Agreement and only to the extent that the Borrower shall have sufficient income or proceeds therefrom to enable the Borrower to make payments in accordance with the terms hereof 17 13 after giving effect to the priority of payments provisions set forth in the Intercreditor Agreement. The Liquidity Provider agrees that it will look solely to such amounts to the extent available for distribution to it as provided in the Intercreditor Agreement and this Agreement and that the Borrower, in its individual capacity, is not personally liable to it for any amounts payable or liability under this Agreement except as expressly provided in this Agreement, the Intercreditor Agreement or any Participation Agreement. Amounts on deposit in the Class C Cash Collateral Account shall be available to the Borrower to make payments under this Agreement only to the extent and for the purposes expressly contemplated in Section 3.6(f) of the Intercreditor Agreement. Section 2.10. [Intentionally omitted] ARTICLE III OBLIGATIONS OF THE BORROWER Section 3.01. Increased Costs. The Borrower shall pay to the Liquidity Provider from time to time such amounts as may be necessary to compensate the Liquidity Provider for any increased costs incurred by the Liquidity Provider which are attributable to its making or maintaining any LIBOR Advances hereunder or its obligation to make any such Advances hereunder, or any reduction in any amount receivable by the Liquidity Provider under this Agreement or the Intercreditor Agreement in respect of any such Advances or such obligation (such increases in costs and reductions in amounts receivable being herein called "Additional Costs"), resulting from any change after the date of this Agreement in U.S. federal, state, municipal, or foreign laws or regulations which changes the basis of taxation of any amounts payable to the Liquidity Provider under this Agreement in respect of any such Advances (other than Excluded Taxes). The Liquidity Provider agrees to use reasonable efforts (consistent with applicable legal and regulatory restrictions) to change the jurisdiction of its Lending Office if making such change would avoid the need for, or reduce the amount of, any amount payable under this Section that may thereafter accrue and would not, in the reasonable judgment of the Liquidity Provider, be otherwise disadvantageous to the Liquidity Provider. The Liquidity Provider will notify the Borrower of any event occurring after the date of this Agreement that will entitle the Liquidity Provider to compensation pursuant to this Section 3.01 as promptly as practicable after it obtains knowledge thereof and determines to request such compensation, which notice shall describe in reasonable detail the calculation of the amounts owed under this Section. Determinations by the Liquidity Provider for purposes of this Section 3.01 of the effect of any Regulatory Change on its costs of making or maintaining Advances or on amounts receivable by it in respect of Advances, and of the additional amounts required to compensate the Liquidity Provider in respect of any Additional Costs, shall be prima facie evidence of the amount owed under this Section. 18 14 Section 3.02. Capital Adequacy. If (1) the adoption, after the date hereof, of any applicable governmental law, rule or regulation regarding capital adequacy, (2) any change, after the date hereof, in the interpretation or administration of any such law, rule or regulation by any central bank or other governmental authority charged with the interpretation or administration thereof or (3) compliance by the Liquidity Provider or any corporation controlling the Liquidity Provider with any applicable guideline or request of general applicability, issued after the date hereof, by any central bank or other governmental authority (whether or not having the force of law) that constitutes a change of the nature described in clause (2), has the effect of requiring an increase in the amount of capital required to be maintained by the Liquidity Provider or any corporation controlling the Liquidity Provider, and such increase is based upon the Liquidity Provider's obligations hereunder and other similar obligations, the Borrower shall pay to the Liquidity Provider from time to time such additional amount or amounts as are necessary to compensate the Liquidity Provider for such portion of such increase as shall be reasonably allocable to the Liquidity Provider's obligations to the Borrower hereunder. The Liquidity Provider agrees to use reasonable efforts (consistent with applicable legal and regulatory restrictions) to change the jurisdiction of its Lending Office if making such change would avoid the need for, or reduce the amount of, any amount payable under this Section that may thereafter accrue and would not, in the reasonable judgment of the Liquidity Provider, be otherwise materially disadvantageous to the Liquidity Provider. The Liquidity Provider will notify the Borrower of any event occurring after the date of this Agreement that will entitle the Liquidity Provider to compensation pursuant to this Section 3.02 as promptly as practicable after it obtains knowledge thereof and determines to request such compensation, which notice shall describe in reasonable detail the calculation of the amounts owed under this Section. Determinations by the Liquidity Provider for purposes of this Section 3.02 of the effect of any increase in the amount of capital required to be maintained by the bank and of the amount allocable to the Liquidity Provider's obligations to the Borrower hereunder shall be prima facie evidence of the amounts owed under this Section. Section 3.03. Payments Free of Deductions. All payments made by the Borrower under this Agreement shall be made free and clear of, and without reduction for or on account of, any present or future stamp or other taxes, levies, imposts, duties, charges, fees, deductions, withholdings, restrictions or conditions of any nature whatsoever now or hereafter imposed, levied, collected, withheld or assessed, excluding Excluded Taxes (such non-excluded taxes being referred to herein, collectively, as "Non-Excluded Taxes" and, individually, as a "Non-Excluded Tax"). If any Non-Excluded Taxes are required to be withheld from any amounts payable to the Liquidity Provider under this Agreement, the amounts so payable to the Liquidity Provider shall be increased to the extent necessary to yield to the Liquidity Provider (after payment of all Non-Excluded Taxes) interest or any other such amounts payable under this Agreement at the rates or in the amounts specified in 19 15 this Agreement. The Liquidity Provider agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Lending Office if making such change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the reasonable judgment of the Liquidity Provider, be otherwise disadvantageous to the Liquidity Provider. From time to time upon the reasonable request of the Borrower, the Liquidity Provider agrees to provide to the Borrower two original Internal Revenue Service Forms 1001 or 4224, as appropriate, or any successor or other form prescribed by the Internal Revenue Service, certifying that the Liquidity Provider is exempt from or entitled to a reduced rate of United States withholding tax on payments pursuant to this Agreement. (b) All payments (including, without limitation, Advances) made by the Liquidity Provider under this Agreement shall be made free and clear of, and without reduction for or on account of, any Taxes. If any Taxes are required to be withheld or deducted from any amounts payable to the Borrower under this Agreement, the Liquidity Provider shall (i) within the time prescribed therefor by applicable law pay to the appropriate governmental or taxing authority the full amount of any such Taxes (and any additional Taxes in respect of the payment required under clause (ii) hereof) and make such reports or returns in connection therewith at the time or times and in the manner prescribed by applicable law, and (ii) pay to the Borrower an additional amount which (after deduction of all such Taxes) will be sufficient to yield to the Borrower the full amount which would have been received by it had no such withholding or deduction been made. Within 30 days after the date of each payment hereunder, the Liquidity Provider shall furnish to the Borrower the original or a certified copy of (or other documentary evidence of) the payment of the Taxes applicable to such payment. Section 3.04. Payments. The Borrower shall make or cause to be made each payment to the Liquidity Provider under this Agreement so as to cause the same to be received by the Liquidity Provider not later than 1:00 P.M. (New York City time) on the day when due. The Borrower shall make all such payments in lawful money of the United States of America, to the Liquidity Provider in immediately available funds, by wire transfer to Citibank, N.A., New York, NY, ABA# 021000089, Account Name: Morgan Stanley Capital Services, Inc., Account # 4072-4601, Reference: Atlas Air, Inc., 1998-1C. Section 3.05. Computations. All computations of interest based on the Base Rate shall be made on the basis of a year of 365 or 366 days, as the case may be, and all computations of interest based on the LIBOR Rate shall be made on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest is payable. Section 3.06. Payment on Non-Business Days. Whenever any payment to be made hereunder shall be stated to be due on a day other than a Business Day, such payment 20 16 shall be made on the next succeeding Business Day and no additional interest shall be due as a result (and if so made, shall be deemed to have been made when due). If any payment in respect of interest on an Advance is so deferred to the next succeeding Business Day, such deferral shall not delay the commencement of the next Interest Period for such Advance (if such Advance is a LIBOR Advance) or reduce the number of days for which interest will be payable on such Advance on the next interest payment date for such Advance. Section 3.07. Interest. (a) Subject to Section 2.09, the Borrower shall pay, or shall cause to be paid, without duplication, interest on (i) the unpaid principal amount of each Advance from and including the date of such Advance (or, in the case of an Applied Provider Advance, from and including the date on which the amount thereof was withdrawn from the Class C Cash Collateral Account to pay interest on the Class C Certificates) to but excluding the date such principal amount shall be paid in full (or, in the case of an Applied Provider Advance, the date on which the Class C Cash Collateral Account is fully replenished in respect of such Advance) and (ii) any other amount due hereunder (whether fees, commissions, expenses or other amounts or, to the extent permitted by law, installments of interest on Advances or any such other amount) which is not paid when due (whether at stated maturity, by acceleration or otherwise) from and including the due date thereof to but excluding the date such amount is paid in full, in each such case, at a fluctuating interest rate per annum for each day equal to the Applicable Liquidity Rate (as defined below) for such Advance or such other amount as in effect for such day, but in no event at a rate per annum greater than the maximum rate permitted by applicable law; provided, however, that, if at any time the otherwise applicable interest rate as set forth in this Section 3.07 shall exceed the maximum rate permitted by applicable law, then any subsequent reduction in such interest rate will not reduce the rate of interest payable pursuant to this Section 3.07 below the maximum rate permitted by applicable law until the total amount of interest accrued equals the amount of interest that would have accrued if such otherwise applicable interest rate as set forth in this Section 3.07 had at all times been in effect. (b) Except as provided in clause (e) below, each Advance will be either a Base Rate Advance or a LIBOR Advance as provided in this Section. Each such Advance will be a Base Rate Advance for the period from the date of its borrowing to (but excluding) the third Business Day following the Liquidity Provider's receipt of the Notice of Borrowing for such Advance. Thereafter, such Advance shall be a LIBOR Advance; provided that the Borrower (at the direction of the Controlling Party), so long as the Liquidity Provider is not the Controlling Party) may (x) convert the Final Advance into a Base Rate Advance on the last day of an Interest Period for such Advance by giving the Liquidity Provider no less than four Business Days' prior written notice of such election or (y) elect to maintain the Final Advance as a Base Rate Advance by not requesting a conversion of the Final Advance to a LIBOR Advance under Clause (5) of the applicable Notice of Borrowing. 21 17 (c) Each LIBOR Advance shall bear interest during each Interest Period at a rate per annum equal to the LIBOR Rate for such Interest Period plus the Applicable Margin for such LIBOR Advance, payable in arrears on the last day of such Interest Period and, in the event of the payment of principal of such LIBOR Advance on a day other than such last day, on the date of such payment (to the extent of interest accrued on the amount of principal repaid). (d) Each Base Rate Advance shall bear interest at a rate per annum equal to the Base Rate plus the Applicable Margin for such Base Rate Advance, payable in arrears on each Regular Distribution Date and, in the event of the payment of principal of such Base Rate Advance on a day other than a Regular Distribution Date, on the date of such payment (to the extent of interest accrued on the amount of principal repaid). (e) Each Unapplied Downgrade Advance (i) during the period from and including the date of the making of such Unapplied Downgrade Advance through but excluding the Expiry Date (or, if earlier, the date of repayment thereof or of conversion thereof into a Final Advance), shall bear interest at a rate per annum equal to the LIBOR Rate for such Interest Period plus 0.40% on the amount of such Unapplied Downgrade Advance from time to time during such period, payable in arrears on each Regular Distribution Date and (ii) thereafter, shall be a LIBOR Advance and shall bear interest in accordance with clause (c) above. (f) [Intentionally omitted] (g) Each amount not paid when due hereunder (whether fees, commissions, expenses or other amounts or, to the extent permitted by applicable law, installments of interest on Advances but excluding Advances) shall bear interest at a rate per annum equal to the Base Rate plus 2.00% until paid. (h) Each change in the Base Rate shall become effective immediately. The rates of interest specified in this Section 3.07 with respect to any Advance or other amount shall be referred to as the "Applicable Liquidity Rate". Section 3.08. Replacement of Borrower. From time to time and subject to the successor Borrower's meeting the eligibility requirements set forth in Section 6.9 of the Intercreditor Agreement applicable to the Subordination Agent, upon the effective date and time specified in a written and completed Notice of Replacement Subordination Agent in substantially the form of Annex V attached hereto (a "Notice of Replacement Subordination Agent") delivered to the Liquidity Provider by the then Borrower, the successor Borrower designated therein shall be substituted for as the Borrower for all purposes hereunder. 22 18 Section 3.09. Funding Loss Indemnification. The Borrower shall pay to the Liquidity Provider, upon the request of the Liquidity Provider, such amount or amounts as shall be sufficient (in the reasonable opinion of the Liquidity Provider) to compensate it for any loss, cost, or expense incurred by reason of the liquidation or redeployment of deposits or other funds acquired by the Liquidity Provider to fund or maintain any LIBOR Advance (but excluding loss of anticipated profits) incurred as a result of: (1) Any repayment of a LIBOR Advance on a date other than the last day of the Interest Period for such Advance; or (2) Any failure by the Borrower to borrow a LIBOR Advance on the date for borrowing specified in the relevant notice under Section 2.02. Section 3.10. Illegality. Notwithstanding any other provision in this Agreement, if any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the Liquidity Provider (or its Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for the Liquidity Provider (or its Lending Office) to maintain or fund its LIBOR Advances, then upon notice to the Borrower by the Liquidity Provider, the outstanding principal amount of the LIBOR Advances shall be converted to Base Rate Advances (a) immediately upon demand of the Liquidity Provider, if such change or compliance with such request, in the judgment of the Liquidity Provider, requires immediate repayment; or (b) at the expiration of the last Interest Period to expire before the effective date of any such change or request. ARTICLE IV CONDITIONS PRECEDENT Section 4.01. Conditions Precedent to Effectiveness of Section 2.01. Section 2.01 of this Agreement shall become effective on and as of the first date (the "Effective Date") on which the following conditions precedent have been satisfied or waived: (a) The Liquidity Provider shall have received on or before the Closing Date each of the following, and in the case of each document delivered pursuant to paragraphs (i), (ii) and (iii), each in form and substance satisfactory to the Liquidity Provider: (i) This Agreement duly executed on behalf of the Borrower; 23 19 (ii) The Intercreditor Agreement duly executed on behalf of each of the parties thereto; (iii) Fully executed copies of each of the Operative Agreements executed and delivered on or before the Closing Date (other than this Agreement and the Intercreditor Agreement); (iv) A copy of the Offering Memorandum and specimen copies of the Class C Certificates; (v) An executed copy of each document, instrument, certificate and opinion delivered on or before the Closing Date pursuant to the Class C Trust Agreement, the Intercreditor Agreement and the other Operative Agreements (in the case of each such opinion, other than the opinion of counsel for the Placement Agents, either addressed to the Liquidity Provider or accompanied by a letter from the counsel rendering such opinion to the effect that the Liquidity Provider is entitled to rely on such opinion as of its date as if it were addressed to the Liquidity Provider); (vi) Evidence that there shall have been made and shall be in full force and effect, all filings, recordings and/or registrations, and there shall have been given or taken any notice or other similar action as may be reasonably necessary or, to the extent reasonably requested by the Liquidity Provider, reasonably advisable, in order to establish, perfect, protect and preserve the right, title and interest, remedies, powers, privileges, liens and security interests of, or for the benefit of, the Trustees, the Borrower and the Liquidity Provider created by the Operative Agreements executed and delivered on or prior to the Closing Date; (vii) An agreement from Atlas, pursuant to which (i) Atlas agrees to provide copies of quarterly financial statements and audited annual financial statements to the Liquidity Provider, and such other information as the Liquidity Provider shall reasonably request with respect to the transactions contemplated by the Operative Agreements, in each case, only to the extent that Atlas is obligated to provide such information pursuant to Section 8.2.1 of the Leases (related to Leased Aircraft) or the corresponding section of the Indentures (related to Owned Aircraft) to the parties thereto and (ii) Atlas agrees to allow the Liquidity Provider to inspect Atlas's books and records regarding such transactions, and to discuss such transactions with officers and employees of Atlas; and (viii) Such other documents, instruments, opinions and approvals pertaining to the transactions contemplated hereby or by the other Operative Agreements as the Liquidity Provider shall have reasonably requested. 24 20 (b) The following statement shall be true on and as of the Effective Date: No event has occurred and is continuing, or would result from the entering into of this Agreement or the making of any Advance, which constitutes a Liquidity Event of Default. (c) The Liquidity Provider shall have received payment in full of all fees and other sums required to be paid to or for the account of the Liquidity Provider on or prior to the Effective Date. (d) All conditions precedent to the issuance of the Certificates under the Trust Agreements shall have been satisfied or waived, all conditions precedent to the effectiveness of the other Liquidity Facilities shall have been satisfied or waived, and all conditions precedent to the purchase of the Certificates by the Placement Agents under the Placement Agreement shall have been satisfied (unless any of such conditions precedent shall have been waived by the Placement Agents) . (e) The Borrower shall have received on or before the Closing Date each of the following: (i) The Guarantee Agreement, substantially in the form of Exhibit I hereto, duly executed on behalf of each of the parties thereto; (ii) A certificate, dated the date hereof, signed by a duly authorized representative of the Liquidity Provider, certifying that all conditions precedent to the effectiveness of Section 2.01 have been satisfied or waived. Section 4.02. Conditions Precedent to Borrowing. The obligation of the Liquidity Provider to make an Advance on the occasion of each Borrowing shall be subject to the conditions precedent that the Effective Date shall have occurred and, prior to the date of such Borrowing, the Borrower shall have delivered a Notice of Borrowing which conforms to the terms and conditions of this Agreement and has been completed as may be required by the relevant form of the Notice of Borrowing for the type of Advances requested. ARTICLE V COVENANTS Section 5.01. Affirmative Covenants of the Borrower. So long as any Advance shall remain unpaid or the Liquidity Provider shall have any Maximum Commitment hereunder or the Borrower shall have any obligation to pay any amount to the Liquidity Provider hereunder, the Borrower will, unless the Liquidity Provider shall otherwise consent in writing: 25 21 (a) Performance of This and Other Agreements. Punctually pay or cause to be paid all amounts payable by it under this Agreement and the other Operative Agreements and observe and perform in all material respects the conditions, covenants and requirements applicable to it contained in this Agreement and the other Operative Agreements. (b) Reporting Requirements. Furnish to the Liquidity Provider with reasonable promptness, such other information and data with respect to the transactions contemplated by the Operative Agreements as from time to time may be reasonably requested by the Liquidity Provider; and permit the Liquidity Provider, upon reasonable notice, to inspect the Borrower's books and records with respect to such transactions and to meet with officers and employees of the Borrower to discuss such transactions. (c) Certain Operative Agreements. Furnish to the Liquidity Provider with reasonable promptness such Operative Agreements entered into after the date hereof as from time to time may be reasonably requested by the Liquidity Provider. Section 5.02. Negative Covenants of the Borrower. So long as any Advance shall remain unpaid or the Liquidity Provider shall have any Maximum Commitment hereunder or the Borrower shall have any obligation to pay any amount to the Liquidity Provider hereunder, the Borrower will not appoint or permit or suffer to be appointed any successor Borrower without the prior written consent of the Liquidity Provider, which consent shall not be unreasonably withheld or delayed. ARTICLE VI LIQUIDITY EVENTS OF DEFAULT Section 6.01. Liquidity Events of Default. If (a) any Liquidity Event of Default has occurred and is continuing and (b) there is a Performing Note Deficiency, the Liquidity Provider may, in its discretion, deliver to the Borrower a Termination Notice, the effect of which shall be to cause (i) this Agreement to expire on the fifth Business Day after the date on which such Termination Notice is received by the Borrower, (ii) the Borrower to promptly request, and the Liquidity Provider to promptly make, a Final Advance in accordance with Section 2.02(d) hereof and Section 3.6(i) of the Intercreditor Agreement, (iii) all other outstanding Advances to be automatically converted into Final Advances for purposes of determining the Applicable Liquidity Rate for interest payable thereon, and (iv) subject to Sections 2.07 and 2.09 hereof, all Advances (including, without limitation, any Provider Advance and Applied Provider Advance), any accrued interest thereon and any 26 22 other amounts outstanding hereunder to become immediately due and payable to the Liquidity Provider. ARTICLE VII MISCELLANEOUS Section 7.01. Amendments, Etc., No amendment or waiver of any provision of this Agreement, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Liquidity Provider, and, in the case of an amendment or of a waiver by the Borrower, the Borrower, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Section 7.02. Notices, Etc. Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including telecopier and mailed or delivered or sent by telecopier): Borrower: WILMINGTON TRUST COMPANY One Rodney Square 1100 North Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Telecopy: (302) 651-8882 Liquidity Provider: MORGAN STANLEY CAPITAL SERVICES, INC. 1585 Broadway New York, NY 10036 Attention: Keith Amburgey Telecopy: (212) 761-0580 or, as to each of the foregoing, at such other address as shall be designated by such Person in a written notice to the others. All such notices and communications shall be effective (i) if given by telecopier, when transmitted to the telecopier number specified above, (ii) if given by mail, when deposited in the mails addressed as specified above, and (iii) if given by other means, when delivered at the address specified above, except that written notices to the Liquidity Provider pursuant to the provisions of Articles II and III hereof shall not be effective until received by the Liquidity Provider. A copy of all notices delivered hereunder 27 23 to either party shall in addition be delivered to each of the parties to the Participation Agreements at their respective addresses set forth therein. Section 7.03. No Waiver: Remedies. No failure on the part of the Liquidity Provider to exercise, and no delay in exercising, any right under this Agreement shall operate as a waiver thereof; nor shall any single or partial exercise of any right under this Agreement preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. Section 7.04. Further Assurances. The Borrower agrees to do such further acts and things and to execute and deliver to the Liquidity Provider such additional assignments, agreements, powers and instruments as the Liquidity Provider may reasonably require or deem advisable to carry into effect the purposes of this Agreement and the other Operative Agreements or to better assure and confirm unto the Liquidity Provider its rights, powers and remedies hereunder and under the other Operative Agreements. Section 7.05. Indemnification; Survival of Certain Provisions. The Liquidity Provider shall be indemnified hereunder to the extent and in the manner described in Section 9.1 of the Leased Aircraft Participation Agreement, Section 8.1 of the Owned Aircraft Participation Agreement and Section 6 of the Note Purchase Agreement. In addition, the Borrower agrees to indemnify, protect, defend and hold harmless the Liquidity Provider from, against and in respect of, and shall pay on demand, all Expenses of any kind or nature whatsoever (other than any Expenses of the nature described in Sections 3.01, 3.02 or 7.07 hereof or in the MSCS Fee Letter (regardless of whether indemnified against pursuant to said Sections or in such MSCS Fee Letter)), that may be imposed, incurred by or asserted against any Liquidity Indemnitee, in any way relating to, resulting from, or arising out of or in connection with any action, suit or proceeding by any third party against such Liquidity Indemnitee and relating to this Agreement, the MSCS Fee Letter, the Intercreditor Agreement or any Financing Agreement; provided, however, that the Borrower shall not be required to indemnify, protect, defend and hold harmless any Liquidity Indemnitee in respect of any Expense of such Liquidity Indemnitee (i) to the extent such Expense is attributable to the gross negligence or willful misconduct of such Liquidity Indemnitee or any other Liquidity Indemnitee, (ii) ordinary and usual operating overhead expense, or (iii) attributable to the failure by such Liquidity Indemnitee or any other Liquidity Indemnitee to perform or observe any agreement, covenant or condition on its part to be performed or observed in this Agreement, the Intercreditor Agreement, the MSCS Fee Letter or any other Operative Agreement to which it is a party. The indemnities contained in Section 9.1 or 8.1, as the case may be, of the Participation Agreements, and the provisions of Sections 3.01, 3.02, 3.03, 3.09, 7.05 and 7.07 hereof, shall survive the termination of this Agreement. 28 24 Section 7.06. Liability of the Liquidity Provider. (a) Neither the Liquidity Provider nor any of its officers, employees, directors or affiliates shall be liable or responsible for: (i) the use which may be made of the Advances or any acts or omissions of the Borrower or any beneficiary or transferee in connection therewith; (ii) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; or (iii) the making of Advances by the Liquidity Provider against delivery of a Notice of Borrowing and other documents which do not comply with the terms hereof; provided, however, that the Borrower shall have a claim against the Liquidity Provider, and the Liquidity Provider shall be liable to the Borrower, to the extent of any damages suffered by the Borrower which were the result of (A) the Liquidity Provider's willful misconduct or negligence in determining whether documents presented hereunder comply with the terms hereof, or (B) any breach by the Liquidity Provider of any of the terms of this Agreement, including, but not limited to, the Liquidity Provider's failure to make lawful payment hereunder after the delivery to it by the Borrower of a Notice of Borrowing strictly complying with the terms and conditions hereof. (b) Neither the Liquidity Provider nor any of its officers, employees, director or affiliates shall be liable or responsible in any respect for (i) any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with this Agreement or any Notice of Borrowing delivered hereunder, or (ii) any action, inaction or omission which may be taken by it in good faith, absent willful misconduct or negligence (in which event the extent of the Liquidity Provider's potential liability to the Borrower shall be limited as set forth in the immediately preceding paragraph), in connection with this Agreement or any Notice of Borrowing. Section 7.07. Costs, Expenses and Taxes. The Borrower agrees to pay, or cause to be paid (A) on the Effective Date and on such later date or dates on which the Liquidity Provider shall make demand, all reasonable out-of- pocket costs and expenses (including, without limitation, the reasonable fees and expenses of outside counsel for the Liquidity Provider) of the Liquidity Provider in connection with the preparation, negotiation, execution, delivery, filing and recording of this Agreement, any other Operative Agreement and any other documents which may be delivered in connection with this Agreement and (B) on demand, all reasonable costs and expenses (including reasonable counsel fees and expenses) of the Liquidity Provider in connection with (i) the enforcement of this Agreement or any other Operative Agreement, (ii) the modification or amendment of, or supplement to, this Agreement or any other Operative Agreement or such other documents which may be delivered in connection herewith or therewith (whether or not the same shall become effective) or (iii) any action or proceeding relating to any order, injunction, or other process or decree restraining or seeking to restrain the Liquidity Provider from paying any amount under this Agreement, the Intercreditor Agreement or any other Operative Agreement or otherwise affecting the application of funds in the Class C Cash Collateral Account. In 29 25 addition, the Borrower shall pay any and all recording, stamp and other similar taxes and fees payable or determined to be payable in connection with the execution, delivery, filing and recording of this Agreement, any other Operative Agreement and such other documents, and agrees to save the Liquidity Provider harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes or fees. Section 7.08. Binding Effect; Participations. (a) This Agreement shall be binding upon and inure to the benefit of the Borrower and the Liquidity Provider and their respective successors and assigns, except that neither the Liquidity Provider (except as otherwise provided in this Section 7.08) nor (except as contemplated by Section 3.08) the Borrower shall have the right to assign its rights or obligations hereunder or any interest herein without the prior written consent of the other party, subject to the requirements of Section 7.08(b). The Liquidity Provider may grant participations herein or in any of its rights hereunder (including, without limitation, funded participations and participations in rights to receive interest payments hereunder) and under the other Operative Agreements to such Persons as the Liquidity Provider may in its sole discretion select, subject to the requirements of Section 7.08(b). No such participation by the Liquidity Provider, however, will relieve the Liquidity Provider of its obligations hereunder. In connection with any participation or any proposed participation, the Liquidity Provider may disclose to the participant or the proposed participant any information that the Borrower is required to deliver or to disclose to the Liquidity Provider pursuant to this Agreement. The Borrower acknowledges and agrees that the Liquidity Provider's source of funds may derive in part from its participants (other than Atlas). Accordingly, references in this Agreement and the other Operative Agreements to determinations, reserve and capital adequacy requirements, increased costs, reduced receipts, additional amounts due pursuant to Section 3.03(a) and the like as they pertain to the Liquidity Provider shall be deemed also to include those of each of its participants (subject, in each case, to the maximum amount that would have been incurred by or attributable to the Liquidity Provider directly if the Liquidity Provider, rather than the participant, had held the interest participated). (b) If, pursuant to subsection (a) above, the Liquidity Provider sells any participation in this Agreement to any bank or other entity (each, a "Transferee"), then, concurrently with the effectiveness of such participation, the Transferee shall (i) represent to the Liquidity Provider (for the benefit of the Liquidity Provider and the Borrower) either (A) that it is incorporated under the laws of the United States or a state thereof or (B) that under applicable law and treaties, no taxes will be required to be withheld with respect to any payments to be made to such Transferee in respect of this Agreement, (ii) furnish to the Liquidity Provider and the Borrower either (x) a statement that it is incorporated under the laws of the United States or a state thereof or (y) if it is not so incorporated, two copies of a properly completed United States Internal Revenue Service Form 4224 or Form 1001, as appropriate, or other applicable form, certificate or document prescribed by the Internal 30 26 Revenue Service certifying, in each case, such Transferee's entitlement to a complete exemption from United States federal withholding tax in respect to any and all payments to be made hereunder, and (iii) agree (for the benefit of the Liquidity Provider and the Borrower) to provide the Liquidity Provider and the Borrower a new Form 4224 or Form 1001, as appropriate, (A) on or before the date that any such form expires or becomes obsolete or (B) after the occurrence of any event requiring a change in the most recent form previously delivered by it and prior to the immediately following due date of any payment by the Borrower hereunder, certifying in the case of a Form 1001 or Form 4224 that such Transferee is entitled to a complete exemption from United States federal withholding tax on payments under this Agreement. Unless the Borrower has received forms or other documents reasonably satisfactory to it (and required by applicable law) indicating that payments hereunder are not subject to United States federal withholding tax, the Borrower will withhold taxes as required by law from such payments at the applicable statutory rate. Section 7.09. Severability. Any provision of this Agreement which is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or nonauthorization without invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction. Section 7.10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. Section 7.11. Submission to Jurisdiction; Waiver of Jury Trial; Waiver of Immunity. (a) Each of the parties hereto hereby irrevocably and unconditionally: (i) submits for itself and its property in any legal action or proceeding relating to this Agreement or any other Operative Agreement, or for recognition and enforcement of any judgment in respect hereof or thereof, to the nonexclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and the appellate courts from any thereof; (ii) consents that any such action or proceeding may be brought in such courts, and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (iii) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially 31 27 similar form and mail), postage prepaid, to each party hereto at its address set forth in Section 7.02 hereof, or at such other address of which the Liquidity Provider shall have been notified pursuant thereto; and (iv) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction. (b) THE BORROWER AND THE LIQUIDITY PROVIDER EACH HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE RELATIONSHIP THAT IS BEING ESTABLISHED, including, without limitation, contract claims, tort claims, breach of duty claims and all other common law and statutory claims. The Borrower and the Liquidity Provider each warrant and represent that it has reviewed this waiver with its legal counsel, and that it knowingly and voluntarily waives its jury trial rights following consultation with such legal counsel. THIS WAIVER IS IRREVOCABLE, AND CANNOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. Section 7.12. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Agreement. Section 7.13. Entirety. This Agreement, the Intercreditor Agreement and the other Operative Agreements to which the Liquidity Provider is a party constitute the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior understandings and agreements of such parties. Section 7.14. Headings. Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. Section 7.15. Transfer. The Liquidity Provider hereby acknowledges and consents to the Transfer contemplated by the Assignment and Assumption Agreement. Section 7.16. LIQUIDITY PROVIDER's OBLIGATION TO MAKE ADVANCES. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE OBLIGATIONS OF THE LIQUIDITY PROVIDER TO MAKE ADVANCES 32 28 HEREUNDER, AND THE BORROWER'S RIGHTS TO DELIVER NOTICES OF BORROWING REQUESTING THE MAKING OF ADVANCES HEREUNDER, SHALL BE UNCONDITIONAL AND IRREVOCABLE, AND SHALL BE PAID OR PERFORMED, IN EACH CASE STRICTLY IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT. 33 29 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first set forth above. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Subordination Agent, as agent and trustee for the Class C Trust, as Borrower By: /s/ JAMES P. LAWLER ----------------------------------- Name: James P. Lawler Title: Vice President MORGAN STANLEY CAPITAL SERVICES, INC., as Liquidity Provider By: /s/ ----------------------------------- Name: Title: 34 Annex I to Revolving Credit Agreement INTEREST ADVANCE NOTICE OF BORROWING The undersigned, a duly authorized signatory of the undersigned borrower (the "Borrower"), hereby certifies to Morgan Stanley Capital Services, Inc. (the "Liquidity Provider"), with reference to the Revolving Credit Agreement (1998-lC) dated as of February 9, 1998, between the Borrower and the Liquidity Provider (the "Liquidity Agreement"; the terms defined therein and not otherwise defined herein being used herein as therein defined or referenced), that: (1) The Borrower is the Subordination Agent under the Intercreditor Agreement. (2) The Borrower is delivering this Notice of Borrowing for the making of an Interest Advance by the Liquidity Provider to be used, subject to clause (3)(v) below, for the payment of the interest on the Class C Certificates which was payable on _______________________ ________ (the "Distribution Date") in accordance with the terms and provisions of the Class C Trust Agreement and the Class C Certificates which Advance is requested to be made on __________, ____. (3) The amount of the Interest Advance requested hereby (i) is $ _______, to be applied in respect of the payment of the interest which was due and payable on the Class C Certificates on the Distribution Date, (ii) does not include any amount with respect to the payment of principal of, or premium on, the Class A Certificates, the Class B Certificates or the Class C Certificates, or interest on the Class A Certificates or the Class B Certificates, (iii) was computed in accordance with the provisions of the Class C Certificates, the Class C Trust Agreement and the Intercreditor Agreement (a copy of which computation is attached hereto as Schedule I), (iv) does not exceed the Maximum Commitment on the date hereof, (v) does not include any amount of interest which was due and payable on the Class C Certificates on such Distribution Date but which remains unpaid due to the failure of the Depositary to pay any amount of accrued interest on the Certificates of Deposit on such Distribution Date and (vi) has not been and is not the subject of a prior or contemporaneous Notice of Borrowing. (4) Upon receipt by or on behalf of the Borrower of the amount requested hereby, (a) the Borrower will apply the same in accordance with the terms of Section 3.6(b) of the Intercreditor Agreement, (b) no portion of such amount shall be applied by the Borrower for any other purpose and (c) no portion of such amount until so applied shall be commingled with other funds held by the Borrower. 35 I-2 The Borrower hereby acknowledges that, pursuant to the Liquidity Agreement, the making of the Interest Advance as requested by this Notice of Borrowing shall automatically reduce, subject to reinstatement in accordance with the terms of the Liquidity Agreement, the Maximum Commitment by an amount equal to the amount of the Interest Advance requested to be made hereby as set forth in clause (i) of paragraph (3) of this Certificate and such reduction shall automatically result in corresponding reductions in the amounts available to be borrowed pursuant to a subsequent Advance. IN WITNESS WHEREOF, the Borrower has executed and delivered this Notice of Borrowing as of the __ day of ________________, _____. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Subordination Agent, as Borrower By: ---------------------------------- Name: Title: SCHEDULE I TO INTEREST ADVANCE NOTICE OF BORROWING [Insert Copy of Computations in accordance with Interest Advance Notice of Borrowing] 36 SCHEDULE I TO INSERT ADVANCE NOTICE OF BORROWING [Insert Copy of Computations in accordance with Interest Advance Notice of Borrowing] 37 Annex II to Revolving Credit Agreement DOWNGRADE ADVANCE NOTICE OF BORROWING The undersigned, a duly authorized signatory of the undersigned subordination agent (the "Borrower"), hereby certifies to Morgan Stanley Capital Services, Inc. (the "Liquidity Provider"), with reference to the Revolving Credit Agreement (1998-lC) dated as of February 9, 1998, between the Borrower and the Liquidity Provider (the "Liquidity Agreement"; the terms defined therein and not otherwise defined herein being used herein as therein defined or referenced), that: (1) The Borrower is the Subordination Agent under the Intercreditor Agreement. (2) The Borrower is delivering this Notice of Borrowing for the making of the Downgrade Advance by the Liquidity Provider to be used for the funding of the Class C Cash Collateral Account in accordance with Section 3.6(c) of the Intercreditor Agreement by reason of (i) the downgrading of the short-term unsecured debt rating of the Guarantor issued by any Rating Agency below the Threshold Rating or (ii) the occurrence of a Guarantee Event, which Advance is requested to be made on __________, ____. (3) The amount of the Downgrade Advance requested hereby (i) is $________.____, which equals the Maximum Commitment on the date hereof and is to be applied in respect of the funding of the Class C Cash Collateral Account in accordance with Section 3.6(c) of the Intercreditor Agreement, (ii) does not include any amount with respect to the payment of the principal of, or premium on, the Class C Certificates, or principal of, or interest or premium on, the Class A Certificates or the Class B Certificates, (iii) was computed in accordance with the provisions of the Class C Certificates, the Class C Trust Agreement and the Intercreditor Agreement (a copy of which computation is attached hereto as Schedule I), and (iv) has not been and is not the subject of a prior or contemporaneous Notice of Borrowing under the Liquidity Agreement. (4) Upon receipt by or on behalf of the Borrower of the amount requested hereby, (a) the Borrower will deposit such amount in the Class C Cash Collateral Account and apply the same in accordance with the terms of Section 3.6(c) of the Intercreditor Agreement, (b) no portion of such amount shall be applied by the Borrower for any other purpose and (c) no portion of such amount until so applied shall be commingled with other funds held by the Borrower. 38 II-2 The Borrower hereby acknowledges that, pursuant to the Liquidity Agreement, (A) the making of the Downgrade Advance as requested by this Notice of Borrowing shall automatically and irrevocably terminate the obligation of the Liquidity Provider to make further Advances under the Liquidity Agreement; and (B) following the making by the Liquidity Provider of the Downgrade Advance requested by this Notice of Borrowing, the Borrower shall not be entitled to request any further Advances under the Liquidity Agreement. IN WITNESS WHEREOF, the Borrower has executed and delivered this Notice of Borrowing as of the ___ day of _________________,____. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Subordination Agent, as Borrower By: ----------------------------------- Name: Title: 39 SCHEDULE I TO DOWNGRADE ADVANCE NOTICE OF BORROWING [Insert Copy of computations in accordance with Downgrade Advance Notice of Borrowing] 40 Annex III to Revolving Credit Agreement FINAL ADVANCE NOTICE OF BORROWING The undersigned, a duly authorized signatory of the undersigned borrower (the "Borrower"), hereby certifies to Morgan Stanley Capital Services, Inc. (the "Liquidity Provider"), with reference to the Revolving Credit Agreement (1998-lC) dated as of February 9, 1998, between the Borrower and the Liquidity Provider (the "Liquidity Agreement"; the terms defined therein and not otherwise defined herein being used herein as therein defined or referenced), that: (1) The Borrower is the Subordination Agent under the Intercreditor Agreement. (2) The Borrower is delivering this Notice of Borrowing for the making of the Final Advance by the Liquidity Provider to be used for the funding of the Class C Cash Collateral Account in accordance with Section 3.6(i) of the Intercreditor Agreement by reason of the receipt by the Borrower of a Termination Notice from the Liquidity Provider with respect to the Liquidity Agreement, which Advance is requested to be made on (3) The amount of the Final Advance requested hereby (i) is $__________.__, which equals the Maximum Commitment on the date hereof and is to be applied in respect of the funding of the Class C Cash Collateral Account in accordance with Section 3.6(i) of the Intercreditor Agreement, (ii) does not include any amount with respect to the payment of principal of, or premium on, the Class C Certificates, or principal of, or interest or premium on, the Class A Certificates or the Class B Certificates, (iii) was computed in accordance with the provisions of the Class C Certificates, the Class C Trust Agreement and the Intercreditor Agreement (a copy of which computation is attached hereto as Schedule I), and (iv) has not been and is not the subject of a prior or contemporaneous Notice of Borrowing. (4) Upon receipt by or on behalf of the Borrower of the amount requested hereby, (a) the Borrower will deposit such amount in the Class C Cash Collateral Account and apply the same in accordance with the terms of Section 3.6(i) of the Intercreditor Agreement, (b) no portion of such amount shall be applied by the Borrower for any other purpose and (c) no portion of such amount until so applied shall be commingled with other funds held by the Borrower. (5) The Borrower hereby requests that the Advance requested hereby be a Base Rate Advance and that such Base Rate Advance be converted into a LIBOR Advance on the third Business Day following your receipt of this notice. 41 IV-2 The Borrower hereby acknowledges that, pursuant to the Liquidity Agreement, (A) the making of the Final Advance as requested by this Notice of Borrowing shall automatically and irrevocably terminate the obligation of the Liquidity Provider to make further Advances under the Liquidity Agreement; and (B) following the making by the Liquidity Provider of the Final Advance requested by this Notice of Borrowing, the Borrower shall not be entitled to request any further Advances under the Liquidity Agreement. IN WITNESS WHEREOF, the Borrower has executed and delivered this Notice of Borrowing as of the ___ day of ______________, ____. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Subordination Agent, as Borrower By: ----------------------------------- Name: Title: 42 SCHEDULE I TO FINAL ADVANCE NOTICE OF BORROWING [Insert Copy of Computations in accordance with Final Advance Notice of Borrowing] 43 Annex IV to Revolving Credit Agreement NOTICE OF TERMINATION [Date] Wilmington Trust Company, as Subordination Agent, as Borrower One Rodney Square 1100 North Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Revolving Credit Agreement dated as of February 9, 1998, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the Atlas Air, Inc. Pass Through Trust, 1998-lC-[O][S], as Borrower, and Morgan Stanley Capital Services, Inc. (the "Liquidity Agreement") - -------------------------------------------------------------------------------- Ladies and Gentlemen: You are hereby notified that pursuant to Section 6.01 of the Liquidity Agreement, by reason of the occurrence of a Liquidity Event of Default and the existence of a Performing Note Deficiency (each as defined therein), we are giving this notice to you in order to cause (i) our obligations to make Advances (as defined therein) under such Liquidity Agreement to terminate on the fifth Business Day after the date on which you receive this notice and (ii) you to request a Final Advance under the Liquidity Agreement pursuant to Section 3.6(i) of the Intercreditor Agreement (as defined in the Liquidity Agreement) as a consequence of your receipt of this notice. 44 V-2 THIS NOTICE IS THE "NOTICE OF TERMINATION" PROVIDED FOR UNDER THE LIQUIDITY AGREEMENT. OUR OBLIGATIONS TO MAKE ADVANCES UNDER THE LIQUIDITY AGREEMENT WILL TERMINATE ON THE FIFTH BUSINESS DAY AFTER THE DATE ON WHICH YOU RECEIVE THIS NOTICE. Very truly yours, Morgan Stanley Capital Services, Inc., as Liquidity Provider By: ---------------------------------- Name: Title: By: ---------------------------------- Name: Title: cc: Wilmington Trust Company, as Class C Trustee 45 Annex V to Revolving Credit Agreement NOTICE OF REPLACEMENT SUBORDINATION AGENT [Date] Attention: Revolving Credit Agreement dated as of February 9, 1998, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the Atlas Air Pass Through Trust, 1998-lC-[O][S], as Borrower, and Morgan Stanley Capital Services, Inc. (the "Liquidity Agreement") - -------------------------------------------------------------------------------- Ladies and Gentlemen: For value received, the undersigned beneficiary hereby irrevocably transfers to: [Name of Transferee] [Address of Transferee] all rights and obligations of the undersigned as Borrower under the Liquidity Agreement referred to above. The transferee has succeeded the undersigned as Subordination Agent under the Intercreditor Agreement referred to in the first paragraph of the Liquidity Agreement, pursuant to the terms of Section 8.1 of the Intercreditor Agreement. By this transfer, all rights of the undersigned as Borrower under the Liquidity Agreement are transferred to the transferee and the transferee shall hereafter have the sole rights and obligations as Borrower thereunder. The undersigned shall pay any costs and expenses of such transfer, including, but not limited to, transfer taxes or governmental charges. 46 VI-2 We ask that this transfer be effective as of _______________, ____. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Subordination Agent, as Borrower By: -------------------------------- Name: Title: 47 Exhibit I to Revolving Credit Agreement FORM OF GUARANTEE AGREEMENT EX-10.106 20 GUARANTEE 1998B 1 EXHIBIT 10.106 February 9, 1998 Atlas Air, Inc. Pass Through Trust 1998-B Ladies and Gentlemen: In consideration of each of the Revolving Credit Agreement (the "Agreement") dated as of February 9, 1998 between Morgan Stanley Capital Services Inc., a Delaware corporation (hereinafter "MSCS") and Atlas Air, Inc. Pass Through Trust 1998-B ("Counterparty"), Morgan Stanley, Dean Witter, Discover & Co., a Delaware corporation (hereinafter "MSDWD"), hereby irrevocably and unconditionally guarantees to Counterparty, with effect from the date of the Agreement, the due and punctual payment of all amounts payable by MSCS under the Agreement when the same shall become due and payable, whether on scheduled payment dates, upon demand, upon declaration of termination or otherwise, in accordance with the terms of the Agreement and giving effect to any applicable grace period. Upon failure of MSCS punctually to pay any such amounts, and upon written demand by Counterparty to MSDWD at its address set forth in the signature block of this Guarantee (or to such other address as MSDWD may specify in writing), MSDWD agrees to pay or cause to be paid such amounts; provided that delay by Counterparty in giving such demand shall in no event affect MSDWD's obligations under this Guarantee. MSDWD hereby agrees that its obligations hereunder shall be unconditional and will not be discharged except by complete payment of the amounts payable under the Agreement, irrespective of any claim as to the Agreement's validity, regularity or enforceability or the lack of authority of MSCS to execute or deliver the Agreement; or any change in or amendment to the Agreement; or any waiver or consent by Counterparty with respect to any provisions thereof; or the absence of any action to enforce the Agreement or the recovery of any judgment against MSCS or of any action to enforce a judgment against MSCS under the Agreement; or any similar circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor generally. MSDWD hereby waives diligence, presentment, demand on MSCS for payment or otherwise (except as provided hereinabove), filing of claims, requirement of a prior proceeding against MSCS and protest or notice, except as provided for in the Agreement with respect to amounts payable by MSCS. If at any time payment under the Agreement is rescinded or must be otherwise restored or returned by Counterparty upon the insolvency, bankruptcy or reorganization of MSCS or MSDWD or otherwise, MSDWD's obligations hereunder with respect to such payment shall be reinstated upon such restoration or return being made by Counterparty. MSDWD represents to Counterparty as of the date hereof, which representations will be deemed to be repeated by MSDWD on each date on which a Transaction is entered into, that: (1) it is duly organized and validly existing under the laws of the jurisdiction of its incorporation and has full power and legal right to execute and deliver this Guarantee and to perform the provisions of this Guarantee on its part to be performed; (2) its execution, delivery and performance of this Guarantee have been and remain duly authorized by all necessary corporate action and do not contravene any provision of its certificate of incorporation or by-laws or any law, regulation or contractual restriction binding on it or its assets; 2 (3) all consents, authorizations, approvals and clearances (including, without limitation, any necessary exchange control approval) and notifications, reports and registrations requisite for its due execution, delivery and performance of this Guarantee have been obtained from or, as the case may be, filed with the relevant governmental authorities having jurisdiction and remain in full force and effect and all conditions thereof have been duly complied with and no other action by, and no notice to or filing with, any governmental authority having jurisdiction is required for such execution, delivery or performance; and (4) this Guarantee is its legal, valid and binding obligation enforceable against it in accordance with its terms except as enforcement hereof may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights or by general equity principles. By accepting this Guarantee and entering into the Agreement, Counterparty agrees that MSDWD shall be subrogated to all rights of Counterparty against MSCS in respect of any amounts paid by MSDWD pursuant to this Guarantee, provided that MSDWD shall be entitled to enforce or to receive any payment arising out of or based upon such right of subrogation only to the extent that it has paid all amounts payable by MSCS under the Agreement. This Guarantee shall be governed by and construed in accordance with the laws of the State of New York. All capitalized terms not otherwise defined herein shall have the respective meanings assigned to them in the Agreement. MORGAN STANLEY, DEAN WITTER, DISCOVER & CO. By: /s/ --------------------------- Name: Title: Address: 1585 Broadway 3rd Floor New York, NY 10036 Attention: Swap Group Fax No.: (212) 761-0580 2 EX-10.107 21 GUARANTEE 1998C 1 EXHIBIT 10.107 February 9, 1998 Atlas Air, Inc. Pass Through Trust 1998-C Ladies and Gentlemen: In consideration of each of the Revolving Credit Agreement (the "Agreement") dated as of February 9, 1998 between Morgan Stanley Capital Services Inc., a Delaware corporation (hereinafter "MSCS") and Atlas Air, Inc. Pass Through Trust 1998-C ("Counterparty"), Morgan Stanley, Dean Witter, Discover & Co., a Delaware corporation (hereinafter "MSDWD"), hereby irrevocably and unconditionally guarantees to Counterparty, with effect from the date of the Agreement, the due and punctual payment of all amounts payable by MSCS under the Agreement when the same shall become due and payable, whether on scheduled payment dates, upon demand, upon declaration of termination or otherwise, in accordance with the terms of the Agreement and giving effect to any applicable grace period. Upon failure of MSCS punctually to pay any such amounts, and upon written demand by Counterparty to MSDWD at its address set forth in the signature block of this Guarantee (or to such other address as MSDWD may specify in writing), MSDWD agrees to pay or cause to be paid such amounts; provided that delay by Counterparty in giving such demand shall in no event affect MSDWD's obligations under this Guarantee. MSDWD hereby agrees that its obligations hereunder shall be unconditional and will not be discharged except by complete payment of the amounts payable under the Agreement, irrespective of any claim as to the Agreement's validity, regularity or enforceability or the lack of authority of MSCS to execute or deliver the Agreement; or any change in or amendment to the Agreement; or any waiver or consent by Counterparty with respect to any provisions thereof; or the absence of any action to enforce the Agreement or the recovery of any judgment against MSCS or of any action to enforce a judgment against MSCS under the Agreement; or any similar circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor generally. MSDWD hereby waives diligence, presentment, demand on MSCS for payment or otherwise (except as provided hereinabove), filing of claims, requirement of a prior proceeding against MSCS and protest or notice, except as provided for in the Agreement with respect to amounts payable by MSCS. If at any time payment under the Agreement is rescinded or must be otherwise restored or returned by Counterparty upon the insolvency, bankruptcy or reorganization of MSCS or MSDWD or otherwise, MSDWD's obligations hereunder with respect to such payment shall be reinstated upon such restoration or return being made by Counterparty. MSDWD represents to Counterparty as of the date hereof, which representations will be deemed to be repeated by MSDWD on each date on which a Transaction is entered into, that: (1) it is duly organized and validly existing under the laws of the jurisdiction of its incorporation and has full power and legal right to execute and deliver this Guarantee and to perform the provisions of this Guarantee on its part to be performed; (2) its execution, delivery and performance of this Guarantee have been and remain duly authorized by all necessary corporate action and do not contravene any provision of its certificate of incorporation or by-laws or any law, regulation or contractual restriction binding on it or its assets; 2 (3) all consents, authorizations, approvals and clearances (including, without limitation, any necessary exchange control approval) and notifications, reports and registrations requisite for its due execution, delivery and performance of this Guarantee have been obtained from or, as the case may be, filed with the relevant governmental authorities having jurisdiction and remain in full force and effect and all conditions thereof have been duly complied with and no other action by, and no notice to or filing with, any governmental authority having jurisdiction is required for such execution, delivery or performance; and (4) this Guarantee is its legal, valid and binding obligation enforceable against it in accordance with its terms except as enforcement hereof may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights or by general equity principles. By accepting this Guarantee and entering into the Agreement, Counterparty agrees that MSDWD shall be subrogated to all rights of Counterparty against MSCS in respect of any amounts paid by MSDWD pursuant to this Guarantee, provided that MSDWD shall be entitled to enforce or to receive any payment arising out of or based upon such right of subrogation only to the extent that it has paid all amounts payable by MSCS under the Agreement. This Guarantee shall be governed by and construed in accordance with the laws of the State of New York. All capitalized terms not otherwise defined herein shall have the respective meanings assigned to them in the Agreement. MORGAN STANLEY, DEAN WITTER, DISCOVER & CO. By:/s/ ------------------------------ Name: Title: Address: 1585 Broadway 3rd Floor New York, NY 10036 Attention: Swap Group Fax No.: (212) 761-0580 2 EX-10.108 22 INTERCREDITOR AGREEMENT 1 EXHIBIT 10.108 EXECUTION COPY - -------------------------------------------------------------------------------- INTERCREDITOR AGREEMENT Dated as of February 9, 1998 AMONG WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Trustee under the Atlas Air Pass Through Trust 1998-1A, Atlas Air Pass Through Trust 1998-1B and Atlas Air Pass Through Trust 1998-1C, ABN AMRO BANK N.V., Chicago Branch, as Class A Liquidity Provider, MORGAN STANLEY CAPITAL SERVICES, INC., as Class B Liquidity Provider and as Class C Liquidity Provider AND WILMINGTON TRUST COMPANY not in its individual capacity except as expressly set forth herein but solely as Subordination Agent and Trustee - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS SECTION 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ARTICLE II TRUST ACCOUNTS; CONTROLLING PARTY SECTION 2.1. Agreement to Terms of Subordination; Payments from Monies Received Only . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 SECTION 2.2. Trust Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 SECTION 2.3. Deposits to the Collection Account and Special Payments Account . . . . . . . . . . . . . . . . . . 27 SECTION 2.4. Distributions of Special Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 SECTION 2.5. Designated Representatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 SECTION 2.6. Controlling Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 ARTICLE III RECEIPT, DISTRIBUTION AND APPLICATION OF AMOUNTS RECEIVED SECTION 3.1. Written Notice of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 SECTION 3.2. Distribution of Amounts on Deposit in the Collection Account . . . . . . . . . . . . . . . . . . . 35 SECTION 3.3. Distribution of Amounts on Deposit Following a Triggering Event . . . . . . . . . . . . . . . . . . 36 SECTION 3.4. Other Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 SECTION 3.5. Payments to the Trustees and the Liquidity Providers . . . . . . . . . . . . . . . . . . . . . . . 39 SECTION 3.6. Liquidity Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 ARTICLE IV EXERCISE OF REMEDIES SECTION 4.1. Directions from the Controlling Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 SECTION 4.2. Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 SECTION 4.3. Discontinuance of Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 SECTION 4.4. Right of Certificateholders to Receive Payments Not to Be Impaired . . . . . . . . . . . . . . . . 48 SECTION 4.5. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
- i - 3 ARTICLE V DUTIES OF THE SUBORDINATION AGENT; AGREEMENTS OF TRUSTEES, ETC. SECTION 5.1. Notice of Indenture Default or Triggering Event . . . . . . . . . . . . . . . . . . . . . . . . . . 48 SECTION 5.2. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 SECTION 5.3. No Duties Except as Specified in Intercreditor Agreement . . . . . . . . . . . . . . . . . . . . . 49 SECTION 5.4. Notice from the Liquidity Providers and Trustees . . . . . . . . . . . . . . . . . . . . . . . . . 49 ARTICLE VI THE SUBORDINATION AGENT SECTION 6.1. Authorization; Acceptance of Trusts and Duties . . . . . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 6.2. Absence of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 6.3. No Representations or Warranties as to Documents . . . . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 6.4. No Segregation of Monies; No Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 6.5. Reliance; Agents; Advice of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 SECTION 6.6. Capacity in Which Acting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 SECTION 6.7. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 SECTION 6.8. May Become Certificateholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 SECTION 6.9. Subordination Agent Required; Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 SECTION 6.10. Money to Be Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 ARTICLE VII INDEMNIFICATION OF SUBORDINATION AGENT SECTION 7.1. Scope of Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 ARTICLE VIII SUCCESSOR SUBORDINATION AGENT SECTION 8.1. Replacement of Subordination Agent; Appointment of Successor . . . . . . . . . . . . . . . . . . . 53 ARTICLE IX SUPPLEMENTS AND AMENDMENTS SECTION 9.1. Amendments, Waivers, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 SECTION 9.2. Subordination Agent Protected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 SECTION 9.3. Effect of Supplemental Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 SECTION 9.4. Notice to Rating Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
- ii - 4 ARTICLE X MISCELLANEOUS SECTION 10.1. Termination of Intercreditor Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 SECTION 10.2. Intercreditor Agreement for Benefit of Trustees, Liquidity Providers and Subordination Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 SECTION 10.3. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 SECTION 10.4. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 SECTION 10.5. No Oral Modifications or Continuing Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 SECTION 10.6. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 SECTION 10.7. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 SECTION 10.8. Counterpart Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 SECTION 10.9. Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 SECTION 10.10. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 SECTION 10.11. Submission to Jurisdiction; Waiver of Jury Trial; Waiver of Immunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
- iii - 5 INTERCREDITOR AGREEMENT INTERCREDITOR AGREEMENT dated as of February 9, 1998, among WILMINGTON TRUST COMPANY, a Delaware corporation ("WTC"), not in its individual capacity but solely as Trustee of each Trust (each as defined below); ABN AMRO BANK N.V., a bank organized under the laws of the Netherlands, acting through its Chicago Branch ("ABN AMRO"), as Class A Liquidity Provider and MORGAN STANLEY CAPITAL SERVICES, INC. ("MSCS"), a corporation organized under the laws of Delaware, as Class B Liquidity Provider and as Class C Liquidity Provider; and WILMINGTON TRUST COMPANY, not in its individual capacity except as expressly set forth herein, but solely as Subordination Agent and trustee hereunder (in such capacity, together with any successor appointed pursuant to Article VIII hereof, the "Subordination Agent"). WHEREAS, all capitalized terms used herein shall have the respective meanings referred to in Article I hereof; WHEREAS, pursuant to each Indenture (i) in the case of each Aircraft that is owned by Atlas at the time such Indenture is entered into (the "Owned Aircraft"), Atlas will issue on a recourse basis three series of Equipment Notes to finance the purchase of such Aircraft, and (ii) in the case of each Aircraft that is leased to Atlas pursuant to a related Lease at the time such Indenture is entered into (the "Leased Aircraft"), the related Owner Trustee will issue on a nonrecourse basis three series of Equipment Notes to finance the purchase of such Aircraft; WHEREAS, pursuant to the Financing Agreements, each Trust will acquire Equipment Notes having an interest rate equal to the interest rate applicable to the Certificates to be issued by such Trust; WHEREAS, pursuant to each Trust Agreement, the Trust created thereby proposes to issue a single class of Certificates (a "Class") bearing the interest rate and having the final distribution date described in such Trust Agreement on the terms and subject to the conditions set forth therein; WHEREAS, pursuant to the Placement Agreement, the Placement Agents propose to purchase the Certificates issued by each Trust in the aggregate face amount set forth opposite the name of such Trust on Schedule I thereto on the terms and subject to the conditions set forth therein; WHEREAS, ABN AMRO (with respect to the Class A Trust) and MSCS (with respect to the Class B Trust and the Class C Trust) propose to enter into separate revolving credit agreements (each, a "Liquidity Facility") with the Subordination Agent, as agent for the Trustee of such Trusts, respectively, for the benefit of the Certificateholders of such Trusts; and 6 WHEREAS, Morgan Stanley, Dean Witter, Discover & Co. (the "Guarantor") will guarantee in full, pursuant to separate Guarantee Agreements dated as of the date hereof (each, a "Guarantee Agreement"), the obligations of MSCS under the Class B Liquidity Facility and the Class C Liquidity Facility, respectively; WHEREAS, it is a condition precedent to the obligations of the Placement Agents under the Placement Agreement that the Subordination Agent, the Trustees and the Liquidity Providers agree to the terms of subordination set forth in this Agreement in respect of each Class of Certificates, and the Subordination Agent, the Trustees and the Liquidity Providers, by entering into this Agreement, hereby acknowledge and agree to such terms of subordination and the other provisions of this Agreement. NOW, THEREFORE, in consideration of the mutual agreements herein contained, and of other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.1. Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: (1) the terms used herein that are defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular; (2) all references in this Agreement to designated "Articles", "Sections" and other subdivisions are to the designated Articles, Sections and other subdivisions of this Agreement; (3) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision; and (4) the term "including" shall mean "including without limitation". "ABN AMRO" has the meaning assigned to such term in the recital of the parties to this Agreement. "ABN AMRO Fee Letter" means the Fee Letter dated February 9, 1998 between ABN AMRO and the Subordination Agent with respect to the Class A Liquidity Facility. 2 7 "Acceleration" means, with respect to the amounts payable in respect of the Equipment Notes issued under any Indenture, such amounts becoming immediately due and payable by declaration or otherwise. "Accelerate", "Accelerated" and "Accelerating" have meanings correlative to the foregoing. "Adjusted Expected Distributions" means, with respect to the Certificates of any Trust on any Current Distribution Date, the sum of (x) accrued and unpaid interest on such Certificates (excluding interest, if any, payable with respect to the Deposits related to such Trust) and (y) the greater of: (A) the difference between (x) the Pool Balance of such Certificates as of the immediately preceding Distribution Date (or, if the Current Distribution Date is the first Distribution Date, the original aggregate face amount of the Certificates of such Trust) and (y) the Pool Balance of such Certificates as of the Current Distribution Date calculated on the basis that (i) the principal of the Non-Performing Equipment Notes held in such Trust has been paid in full and such payments have been distributed to the holders of such Certificates, (ii) the principal of the Performing Equipment Notes held in such Trust has been paid when due (but without giving effect to any Acceleration of Performing Equipment Notes) and such payments have been distributed to the holders of such Certificates and (iii) the principal of any Equipment Notes formerly held in such Trust that have been sold pursuant to the terms hereof has been paid in full and such payments have been distributed to the holders of such Certificates, but without giving effect to any reduction in the Pool Balance as a result of any distribution attributable to Deposits occurring after the immediately preceding Distribution Date (or, if the Current Distribution Date is the first Distribution Date, occurring after the initial issuance of the Certificates of such Trust), and (B) the amount of the excess, if any, of (i) the Pool Balance of such Class of Certificates as of the immediately preceding Distribution Date (or, if the Current Distribution Date is the first Distribution Date, the original aggregate face amount of the Certificates of such Trust), less the amount of the Deposits for such Class of Certificates as of such preceding Distribution Date (or, if the Current Distribution Date is the first Distribution Date, the original aggregate amount of the Deposits for such Class of Certificates) other than any portion of such Deposits thereafter used to acquire Equipment Notes pursuant to the Note Purchase Agreement, over (ii) the Aggregate LTV Collateral Amount for such Class of Certificates for the Current Distribution Date; provided that, until the date of the initial LTV Appraisals, clause (B) shall not apply. For purposes of calculating Adjusted Expected Distributions with respect to the Certificates of any Trust, any premium paid on the Equipment Notes held in such Trust that has not been distributed to the Certificateholders of such Trust (other than such premium or a 3 8 portion thereof applied to the payment of interest on the Certificates of such Trust or the reduction of the Pool Balance of such Trust) shall be added to the amount of Adjusted Expected Distributions. "Advance", with respect to any Liquidity Facility, means any Advances as defined in such Liquidity Facility. "Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" means the power, directly or indirectly, to direct or cause the direction of the management and policies of such Person whether through the ownership of voting securities or by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Aggregate LTV Collateral Amount" for any Class of Certificates for any Distribution Date means the sum of the applicable LTV Collateral Amounts for each Leased Aircraft and Owned Aircraft, minus the Pool Balance for each Class of Certificates, if any, senior to such Class, after giving effect to any distribution of principal on such Distribution Date with respect to such senior Class or Classes. "Aircraft" has the meaning set forth in the Note Purchase Agreement and, with respect to each Indenture, means the "Aircraft" referred to therein. "AISI" means Aircraft Information Services, Inc. "Appraisal" means a fair market value appraisal (which may be a "desktop" appraisal) performed by any Appraiser or any other nationally recognized appraiser on the basis of an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller under no compulsion to sell and both having knowledge of all relevant facts. "Appraised Current Market Value" of any Leased Aircraft or Owned Aircraft means the lower of the average and the median of the three most recent Appraisals of such Aircraft. "Appraisers" means AISI, AvS and MBA. "Assignment and Assumption Agreements" means each of the Assignment and Assumption Agreements to be executed among a Trustee and trustee of the relevant Successor Trust in accordance with the relevant Trust Agreement, as the same may be amended, modified or supplemented from time to time. "Atlas" means Atlas Air, Inc., a Delaware corporation, and its successors and assigns. 4 9 "Atlas Bankruptcy Event" means the occurrence and continuation of any of the following: (a) Atlas shall consent to the appointment of or the taking of possession by a receiver, trustee or liquidator of itself or of a substantial part of its property, or Atlas shall admit in writing its inability to pay its debts generally as they come due, or does not pay its debts generally as they become due or shall make a general assignment for the benefit of creditors, or Atlas shall file a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization, liquidation or other relief in a case under any bankruptcy laws or other insolvency laws (as in effect at such time) or an answer admitting the material allegations of a petition filed against Atlas in any such case, or Atlas shall seek relief by voluntary petition, answer or consent, under the provisions of any other bankruptcy or other similar law providing for the reorganization or winding-up of corporations (as in effect at such time) or Atlas shall seek an agreement, composition, extension or adjustment with its creditors under such laws, or Atlas' board of directors shall adopt a resolution authorizing corporate action in furtherance of any of the foregoing; or (b) an order, judgment or decree shall be entered by any court of competent jurisdiction appointing, without the consent of Atlas, a receiver, trustee or liquidator of Atlas or of any substantial part of its property, or any substantial part of the property of Atlas shall be sequestered, or granting any other relief in respect of Atlas as a debtor under any bankruptcy laws or other insolvency laws (as in effect at such time), and any such order, judgment or decree of appointment or sequestration shall remain in force undismissed, unstayed and unvacated for a period of 60 days after the date of entry thereof; or (c) a petition against Atlas in a case under any bankruptcy laws or other insolvency laws (as in effect at such time) is filed and not withdrawn or dismissed within 60 days thereafter, or if, under the provisions of any law providing for reorganization or winding-up of corporations which may apply to Atlas, any court of competent jurisdiction assumes jurisdiction, custody or control of Atlas or of any substantial part of its property and such jurisdiction, custody or control remains in force unrelinquished, unstayed and unterminated for a period of 60 days. "Atlas Provisions" has the meaning specified in Section 9.1(a). "Available Amount" means, with respect to any Liquidity Facility on any drawing date, subject to the proviso contained in the first sentence of Section 3.6(g) hereof, an amount equal to (a) the Maximum Commitment (as defined in such Liquidity Facility) of such Liquidity Facility at such time, less (b) the aggregate amount of each Interest Drawing honored by the Liquidity Provider under such Liquidity Facility on or prior to such date which has not been reimbursed or reinstated as of such date; provided that, following a 5 10 Downgrade Drawing, a Non-Extension Drawing or a Final Drawing under such Liquidity Facility, the Available Amount of such Liquidity Facility shall be zero. "AvS" means Aviation Solutions Inc. "Business Day" means any day other than a Saturday or Sunday or a day on which commercial banks are required or authorized to close in Denver, Colorado, Chicago, Illinois, New York, New York, or, so long as any Certificate is outstanding, the city and state in which any Trustee, the Subordination Agent or any Loan Trustee maintains its Corporate Trust Office or receives and disburses funds, and that, solely with respect to draws under any Liquidity Facility, also is a "Business Day" as defined in such Liquidity Facility. "Cash Collateral Account" means the Class A Cash Collateral Account, the Class B Cash Collateral Account or the Class C Cash Collateral Account, as applicable. "Certificate" means a Class A Certificate, a Class B Certificate or a Class C Certificate, as applicable. "Certificateholder" means any holder of one or more Certificates. "Class" has the meaning assigned to such term in the preliminary statements to this Agreement. "Class A Cash Collateral Account" means an Eligible Deposit Account in the name of the Subordination Agent maintained at an Eligible Institution, which shall be the Subordination Agent if it shall so qualify, into which all amounts drawn under the Class A Liquidity Facility pursuant to Section 3.6(c), 3.6(d) or 3.6(i) shall be deposited. "Class A Certificateholder" means, at any time, any holder of one or more Class A Certificates. "Class A Certificates" means the certificates issued by the Class A Trust, substantially in the form of Exhibit A to the Class A Trust Agreement, and authenticated by the Class A Trustee, representing fractional undivided interests in the Class A Trust, and any certificates issued in exchange therefor or replacement thereof pursuant to the terms of the Class A Trust Agreement. "Class A Liquidity Facility" means, initially, the Revolving Credit Agreement, dated as of the date hereof, between the Subordination Agent, as agent and trustee for the Class A Trustee, and ABN AMRO and, from and after the replacement of such agreement pursuant hereto, the Replacement Liquidity Facility therefor, if any, in each case as amended, supplemented or otherwise modified from time to time in accordance with its terms. 6 11 "Class A Liquidity Provider" means ABN AMRO, together with any Replacement Liquidity Provider which has issued a Replacement Liquidity Facility to replace the Class A Liquidity Facility pursuant to Section 3.6(e). "Class A Trust" means (i) prior to the Transfer, the Atlas Air Pass Through Trust 1998-1A-O created and administered pursuant to the Class A Trust Agreement and (ii) after the Transfer, the Atlas Air Pass Through Trust 1998- 1A-S created and administered pursuant to the Class A Trust Agreement. "Class A Trust Agreement" means (i) prior to the Transfer, the Pass Through Trust Agreement dated as of February 9, 1998, between Atlas and the Class A Trustee, governing the creation and administration of the Atlas Air Pass Through Trust 1998-1A-O and the issuance of the Class A Certificates, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms, and (ii) after the Transfer, the Pass Through Trust Agreement between Atlas and the Class A Trustee, governing the creation and administration of the Atlas Air Pass Through Trust 1998-1A-S and the issuance of the Class A Certificates, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Class A Trustee" means WTC, not in its individual capacity except as expressly set forth in the Class A Trust Agreement, but solely as trustee under the Class A Trust Agreement, together with any successor trustee appointed pursuant thereto. "Class B Cash Collateral Account" means an Eligible Deposit Account in the name of the Subordination Agent maintained at an Eligible Institution, which shall be the Subordination Agent if it shall so qualify, into which all amounts drawn under the Class B Liquidity Facility pursuant to Section 3.6(c), 3.6(d) or 3.6(i) shall be deposited. "Class B Certificateholder" means, at any time, any holder of one or more Class B Certificates. "Class B Certificates" means the certificates issued by the Class B Trust, substantially in the form of Exhibit A to the Class B Trust Agreement, and authenticated by the Class B Trustee, representing fractional undivided interests in the Class B Trust, and any certificates issued in exchange therefor or replacement thereof pursuant to the terms of the Class B Trust Agreement. "Class B Liquidity Facility" means, initially, the Revolving Credit Agreement, dated as of the date hereof, between the Subordination Agent, as agent and trustee for the Class B Trustee, and MSCS and, from and after the replacement of such Agreement pursuant hereto, the Replacement Liquidity Facility therefor, if any, in each case as amended, supplemented or otherwise modified from time to time in accordance with its terms. 7 12 "Class B Liquidity Provider" means MSCS, together with any Replacement Liquidity Provider which has issued a Replacement Liquidity Facility to replace the Class B Liquidity Facility pursuant to Section 3.6(e). "Class B Trust" means (i) prior to the Transfer, the Atlas Air Pass Through Trust 1998-1B-O created and administered pursuant to the Class B Trust Agreement and (ii) after the Transfer, the Atlas Air Pass Through Trust 1998- 1B-S created and administered pursuant to the Class B Trust Agreement. "Class B Trust Agreement" means (i) prior to the Transfer, the Pass Through Trust Agreement dated as of February 9, 1998 between Atlas and the Class B Trustee, governing the creation and administration of the Atlas Air Pass Through Trust 1998-1B-O and the issuance of the Class B Certificates, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms, and (ii) after the Transfer, the Pass Through Trust Agreement between Atlas and the Class B Trustee, governing the creation and administration of the Atlas Air Pass Through Trust 1998-1B-S and the issuance of the Class B Certificates, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Class B Trustee" means WTC, not in its individual capacity except as expressly set forth in the Class B Trust Agreement, but solely as trustee under the Class B Trust Agreement, together with any successor trustee appointed pursuant thereto. "Class C Cash Collateral Account" means an Eligible Deposit Account in the name of the Subordination Agent and maintained at an Eligible Institution, which shall be the Subordination Agent if it shall so qualify, into which all amounts drawn under the Class C Liquidity Facility pursuant to Section 3.6(c), 3.6(d) or 3.6(i) shall be deposited. "Class C Certificateholder" means, at any time, any holder of one or more Class C Certificates. "Class C Certificates" means the certificates issued by the Class C Trust, substantially in the form of Exhibit A to the Class C Trust Agreement, and authenticated by the Class C Trustee, representing fractional undivided interests in the Class C Trust, and any certificates issued in exchange therefor or replacement thereof pursuant to the terms of the Class C Trust Agreement. "Class C Liquidity Facility" means, initially, the Revolving Credit Agreement. dated as of the date hereof, between the Subordination Agent, as agent and trustee for the Class C Trustee, and MSCS, and, from and after the replacement of such Agreement pursuant hereto, the Replacement Liquidity Facility therefor, if any, in each case as amended, supplemented or otherwise modified from time to time in accordance with its terms. 8 13 "Class C Liquidity Provider means MSCS, together with any Replacement Liquidity Provider which has issued a Replacement Liquidity Facility to replace the Class C Liquidity Facility pursuant to Section 3.6(e). "Class C Trust" means (i) prior to the Transfer, the Atlas Air Pass Through Trust 1998-1C-O created and administered pursuant to the Class C Trust Agreement and (ii) after the Transfer, the Atlas Air Pass Through Trust 1998- 1C-S created and administered pursuant to the Class C Trust Agreement. "Class C Trust Agreement" means (i) prior to the Transfer, the Pass Through Trust Agreement dated as of February 9, 1998 between Atlas and the Class C Trustee, governing the creation and administration of the Atlas Air Pass Through Trust 1998-1C-O and the issuance of the Class C Certificates, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms, and (ii) after the Transfer, the Pass Through Trust Agreement between Atlas and the Class C Trustee, governing the creation and administration of the Atlas Air Pass Through Trust 1998-1C-S and the issuance of the Class C Certificates, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Class C Trustee" means WTC, not in its individual capacity except as expressly set forth in the Class C Trust Agreement, but solely as trustee under the Class C Trust Agreement, together with any successor trustee appointed pursuant thereto. "Class D Certificates" means any pass through certificates issued by the Class D Trust representing fractional undivided interests in the Class D Trust. "Class D Trust" means the Atlas Air Pass Through Trust 1998 1D, if and when established. "Closing Date" means February 9, 1998. "Code" means the Internal Revenue Code of 1986, as amended from time to time, and Treasury Regulations promulgated thereunder. "Collection Account" means the Eligible Deposit Account established by the Subordination Agent pursuant to Section 2.2 which the Subordination Agent shall make deposits in and withdrawals from in accordance with this Agreement. "Controlling Party" means the Person entitled to act as such pursuant to the terms of Section 2.6. "Corporate Trust Office" means, with respect to any Trustee, the Subordination Agent or any Loan Trustee, the office of such Person in the city at which, at any particular time, its corporate trust business shall be principally administered. 9 14 "Current Distribution Date" means a Distribution Date specified as a reference date for calculating the Expected Distributions or the Adjusted Expected Distributions with respect to the Certificates of any Trust as of such Distribution Date. "Deposit Agreement" shall mean, with respect to any Class, the Deposit Agreement pertaining to such Class dated the date hereof between the Escrow Agent, and the Depositary, as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof. "Depositary" means ABN AMRO, as depositary under each Deposit Agreement. "Deposits" with respect to any Class, shall have the meaning set forth in the Deposit Agreement pertaining to such Class. "Designated Representatives" means the Subordination Agent Representatives, the Trustee Representatives and the LP Representatives identified under Section 2.5. "Distribution Date" means a Regular Distribution Date or a Special Distribution Date. "Dollars" means United States dollars. "Downgrade Drawing" has the meaning assigned to such term in Section 3.6(c). "Downgraded Facility" has the meaning assigned to such term in Section 3.6(c). "Drawing" means an Interest Drawing, a Final Drawing, a Non-Extension Drawing or a Downgrade Drawing, as the case may be. "Eligible Deposit Account" means either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution organized under the laws of the United States of America or any one of the states thereof or the District of Columbia (or any U.S. branch of a foreign bank), having corporate trust powers and acting as trustee for funds deposited in such account, so long as any of the securities of such depository institution has a long-term unsecured debt rating from each Rating Agency of at least A-3 or its equivalent. An Eligible Deposit Account may be maintained with a Liquidity Provider so long as such Liquidity Provider is an Eligible Institution; provided that such Liquidity Provider shall have waived all rights of set-off and counterclaim with respect to such account; and provided further that no Cash Collateral Account may be maintained with a Liquidity Provider at any time Atlas holds any participation in the related Liquidity Facility unless written confirmation shall have been 10 15 received from each Rating Agency prior to such time to the effect that such maintenance of the Cash Collateral Account with the Liquidity Provider will not result in a withdrawal or downgrading of the ratings of the Certificates. "Eligible Institution" means (a) the corporate trust department of the Subordination Agent or any Trustee, as applicable, or (b) a depository institution organized under the laws of the United States of America or any one of the states thereof or the District of Columbia (or any U.S. branch of a foreign bank), which has a long-term unsecured debt rating from each Rating Agency of at least A-3 or its equivalent; provided that a Liquidity Provider shall not qualify as an Eligible Institution at any time Atlas holds any participation in the related Liquidity Facility unless written confirmation shall have been received from each Rating Agency to the effect that such Liquidity Provider's status as an Eligible Institution will not result in a withdrawal or downgrading of the ratings of the Certificates. "Eligible Investments" means (a) investments in obligations of, or guaranteed by, the United States Government having maturities no later than 90 days following the date of such investment, (b) investments in open market commercial paper of any corporation incorporated under the laws of the United States of America or any state thereof with a short-term unsecured debt rating issued by Moody's and S&P of at least A-1 and P-1, respectively, having maturities no later than 90 days following the date of such investment or (c) investments in negotiable certificates of deposit, time deposits, banker's acceptances, commercial paper or other direct obligations of, or obligations guaranteed by, commercial banks organized under the laws of the United States or of any political subdivision thereof (or any U.S. branch of a foreign bank) with issuer ratings of at least B/C by Thomson Bankwatch, having maturities no later than 90 days following the date of such investment; provided, however, that (x) all Eligible Investments that are bank obligations shall be denominated in U.S. dollars; and (y) the aggregate amount of Eligible Investments at any one time that are bank obligations issued by any one bank shall not be in excess of 5% of such bank's capital surplus; provided further that (1) any investment of the types described in clauses (a), (b) and (c) above may be made through a repurchase agreement in commercially reasonable form with a bank or other financial institution qualifying as an Eligible Institution so long as such investment is held by a third party custodian also qualifying as an Eligible Institution, and (2) all such investments set forth in clause (a), (b) or (c) above mature no later than the Business Day immediately preceding the next Regular Distribution Date; provided further, however, that in the case of any Eligible Investment issued by a domestic branch of a foreign bank, the income from such investment shall be from sources within the United States for purposes of the Code. Notwithstanding the foregoing, no investment of the types described in clause (b) or (c) above which is issued or guaranteed by a Liquidity Provider or Atlas or any of their respective Affiliates, and no investment in the obligations of any one bank in excess of $10,000,000, shall be an Eligible Investment at any time Atlas holds any participation in the related Liquidity Facility unless written confirmation shall have been received from each Rating Agency that the making of such investment will not result in a withdrawal or downgrading of the ratings of the Certificates. 11 16 "Equipment Notes" means, at any time, the Series A Equipment Notes, the Series B Equipment Notes and the Series C Equipment Notes, collectively, and in each case, any Equipment Notes issued in exchange therefor or replacement thereof pursuant to the terms of the Indentures. "Escrow Agent" means First Security Bank, National Association, as escrow agent under each Escrow and Paying Agent Agreement, together with its successors in such capacity. "Escrow and Paying Agent Agreement" shall mean, with respect to any Class, the Escrow and Paying Agent Agreement pertaining to such Class dated the date hereof between the Escrow Agent, the Placement Agents, the Trustee for such Class and the Paying Agent, as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof. "Expected Distributions" means, with respect to the Certificates of any Trust on any Current Distribution Date, the sum of (x) accrued and unpaid interest on such Certificates (excluding interest, if any, payable with respect to the Deposits related to such Trust) and (y) the difference between (A) the Pool Balance of such Certificates as of the immediately preceding Distribution Date (or, if the Current Distribution Date is the first Distribution Date, the original aggregate face amount of the Certificates of such Trust) and (B) the Pool Balance of such Certificates as of the Current Distribution Date calculated on the basis that (i) the principal of the Equipment Notes held in such Trust has been paid when due (whether at stated maturity or upon redemption, prepayment, purchase or Acceleration or otherwise) and such payments have been distributed to the holders of such Certificates and (ii) the principal of any Equipment Notes formerly held in such Trust that have been sold pursuant to the terms hereof has been paid in full and such payments have been distributed to the holders of such Certificates, but without giving effect to any reduction in the Pool Balance as a result of any distribution attributable to Deposits occurring after the immediately preceding Distribution Date (or, if the Current Distribution Date is the first Distribution Date, occurring after the initial issuance of the Certificates of such Trust). For purposes of calculating Expected Distributions with respect to the Certificates of any Trust, any premium paid on the Equipment Notes held in such Trust which has not been distributed to the Certificateholders of such Trust (other than such premium or a portion thereof applied to the payment of interest on the Certificates of such Trust or the reduction of the Pool Balance of such Trust) shall be added to the amount of such Expected Distributions. "Expiry Date" with respect to any Liquidity Facility, shall have the meaning set forth in such Liquidity Facility. "Fee Letter" means, collectively, the ABN AMRO Fee Letter and the MSCS Fee Letter and any fee letter entered into between the Subordination Agent and any Replacement Liquidity Provider. 12 17 "Final Distributions" means, with respect to the Certificates of any Trust on any Distribution Date, the sum of (x) the aggregate amount of all accrued and unpaid interest on such Certificates (excluding interest, if any, payable with respect to the Deposits relating to such Trust) and (y) the Pool Balance of such Certificates as of the immediately preceding Distribution Date (less the amount of the Deposits for such Class of Certificates as of such preceding Distribution Date other than any portion of such Deposits thereafter used to acquire Equipment Notes pursuant to the Note Purchase Agreement). For purposes of calculating Final Distributions with respect to the Certificates of any Trust, any premium paid on the Equipment Notes held in such Trust which has not been distributed to the Certificateholders of such Trust (other than such premium or a portion thereof applied to the payment of interest on the Certificates of such Trust or the reduction of the Pool Balance of such Trust) shall be added to the amount of such Final Distributions. "Final Drawing" has the meaning assigned to such term in Section 3.6(i). "Final Legal Distribution Date" means (i) with respect to the Class A Certificates, July 2, 2019, (ii) with respect to the Class B Certificates, July 2, 2015 and (iii) with respect to the Class C Certificates, July 2, 2011. "Financing Agreement" means each of the Participation Agreements and the Note Purchase Agreement. "Fitch" means Fitch IBCA, Inc. "Guarantee Agreement" has the meaning assigned to such term in the preliminary statements to this Agreement. "Guarantee Event" has the meaning assigned to such term in Section 3.6(c). "Guarantor" has the meaning assigned to such term in the preliminary statements to this Agreement. "Indenture" means each of the Trust Indentures entered into by the Loan Trustee, and the Owner Trustee or Atlas, pursuant to the Note Purchase Agreement, in each case as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Indenture Default" means, with respect to any Indenture, any Event of Default (as such term is defined in such Indenture) thereunder. "Interest Drawing" has the meaning assigned to such term in Section 3.6(a). 13 18 "Interest Payment Date" means, with respect to any Liquidity Facility, each date on which interest is due and payable under Section 3.07(c), (d) or (e) of such Liquidity Facility on a Downgrade Drawing, Non-Extension Drawing or Final Drawing thereunder. "Investment Earnings" means investment earnings on funds on deposit in the Trust Accounts net of losses and investment expenses of the Subordination Agent in making such investments. "Lease" means, with respect to each Indenture pertaining to a Leased Aircraft, the "Lease" referred to therein. "Leased Aircraft" has the meaning assigned to such term in the preliminary statements of this Agreement. "Leased Aircraft Participation Agreement" means a participation agreement substantially in the form of Exhibit A-1 to the Note Purchase Agreement, as the same may be amended, supplemented or otherwise modified in accordance with its terms. "Lending Office" means, with respect to any Liquidity Facility, the lending office of such Liquidity Provider thereunder, presently located at Chicago, Illinois and New York, New York, for ABN AMRO and MSCS, respectively, or such other lending office as such Liquidity Provider from time to time shall notify the applicable Trustee as its lending office under any such Liquidity Facility; provided that such Liquidity Provider shall not change its Lending Office to a Lending Office outside the United States of America except in accordance with Section 3.01, 3.02 or 3.03 of any such Liquidity Facility. "Lien" means any mortgage, pledge, lien, charge, claim, disposition of title, encumbrance, lease, sublease, sub-sublease or security interest of any kind, including, without limitation, any thereof arising under any conditional sales or other title retention agreement. "Liquidity Event of Default" with respect to any Liquidity Facility, has the meaning assigned to such term in such Liquidity Facility. "Liquidity Expenses" means all Liquidity Obligations other than (i) the principal amount of any Drawings under the Liquidity Facilities and (ii) any interest accrued on any Liquidity Obligations. "Liquidity Facility" means, at any time, the Class A Liquidity Facility, the Class B Liquidity Facility or the Class C Liquidity Facility. "Liquidity Obligations" means all principal, interest, fees and other amounts owing to the Liquidity Providers under the Liquidity Facilities, Section 8.1 of the Owned 14 19 Aircraft Participation Agreements, Section 9.1 of the Leased Aircraft Participation Agreements or the Fee Letters. "Liquidity Provider" means, at any time, the Class A Liquidity Provider, the Class B Liquidity Provider or the Class C Liquidity Provider, as applicable. "Loan Trustee" means, with respect to any Indenture, the loan trustee thereunder. "LP Incumbency Certificate" has the meaning assigned to such term in Section 2.5(b). "LP Representatives" has the meaning assigned to such term in Section 2.5(b). "LTV Appraisals" has the meaning assigned to such term in Section 4.1(a). "LTV Collateral Amount" of any Leased Aircraft or Owned Aircraft for any Class of Certificates means, as of any Distribution Date, the lesser of (i) the LTV Ratio for such Class of Certificates multiplied by the Appraised Current Market Value of such Aircraft (or with respect to any such Aircraft which has suffered an Event of Loss under and as defined in the relevant Lease (in the case of a Leased Aircraft) or Indenture (in the case of an Owned Aircraft), the amount of the insurance proceeds paid to the related Loan Trustee in respect thereof to the extent then held by such Loan Trustee (and/or on deposit in the Special Payments Account) or payable to such Loan Trustee in respect thereof) and (ii) the outstanding principal amount of the Equipment Notes secured by such Aircraft after giving effect to any principal payments of such Equipment Notes on or before such Distribution Date. "LTV Ratio" means for the Class A Certificates 38.1%, for the Class B Certificates 52.8%, and for the Class C Certificates, 68.4%. "Majority Liquidity Providers" means, at any time, Liquidity Providers holding at least a majority of the aggregate outstanding Liquidity Obligations at such time. "MBA" means Morten Beyer & Agnew. "Minimum Sale Price" means, with respect to any Aircraft or the Equipment Notes issued in respect of such Aircraft, at any time, the lesser of (a) 75% of the Appraised Current Market Value of such Aircraft and (b) the aggregate outstanding principal amount of such Equipment Notes, plus accrued and unpaid interest thereon. "Moody's" means Moody's Investors Service, Inc. 15 20 "MSCS" has the meaning assigned to such term in the recital of the parties to this Agreement. "MSCS Fee Letter" means the Fee Letter dated February 9, 1998, between MSCS and the Subordination Agent with respect to the Class B Liquidity Facility and the Class C Liquidity Facility. "MSCS Liquidity Facilities" means the Class B Liquidity Facility and the Class C Liquidity Facility. "Non-Controlling Party" means, at any time, any Trustee or Liquidity Provider which is not the Controlling Party at such time. "Non-Extended Facility" has the meaning assigned to such term in Section 3.6(d). "Non-Extension Drawing" has the meaning assigned to such term in Section 3.6(d). "Non-Performing Equipment Note" means an Equipment Note issued pursuant to an Indenture that is not a Performing Equipment Note. "Note Purchase Agreement" means the Note Purchase Agreement dated as of the date hereof, among Atlas, each Trustee, the Escrow Agent, the Subordination Agent and the Paying Agent. "Officer's Certificate" of any Person means a certification signed by a Responsible Officer of such Person. "Operative Agreements" means this Agreement, the Liquidity Facilities, the Indentures, the Trust Agreements, the Placement Agreement, the Registration Rights Agreement, the Financing Agreements, the Leases, the Fee Letter, the Equipment Notes and the Certificates, together with all exhibits and schedules included with any of the foregoing. "Outstanding" means, when used with respect to each Class of Certificates, as of the date of determination, all Certificates of such Class theretofore authenticated and delivered under the related Trust Agreement, except: (i) Certificates of such Class theretofore canceled by the Registrar (as defined in such Trust Agreement) or delivered to the Trustee thereunder or such Registrar for cancellation; (ii) Certificates of such Class for which money in the full amount required to make the final distribution with respect to such Certificates pursuant to Section 16 21 11.01 of such Trust Agreement has been theretofore deposited with the related Trustee in trust for the holders of such Certificates as provided in Section 4.01 of such Trust Agreement pending distribution of such money to such Certificateholders pursuant to such final distribution payment; and (iii) Certificates of such Class in exchange for or in lieu of which other Certificates have been authenticated and delivered pursuant to such Trust Agreement; provided, however, that in determining whether the holders of the requisite Outstanding amount of such Certificates have given any request, demand, authorization, direction, notice, consent or waiver hereunder, any Certificates owned by Atlas or any of its Affiliates shall be disregarded and deemed not to be Outstanding, except that, in determining whether such Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Certificates that such Trustee knows to be so owned shall be so disregarded. Certificates so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the applicable Trustee the pledgee's right so to act with respect to such Certificates and that the pledgee is not Atlas or any of its Affiliates. "Overdue Scheduled Payment" means any Scheduled Payment which is not in fact received by the Subordination Agent within five days after the Scheduled Payment Date relating thereto. "Owned Aircraft" has the meaning assigned to such term in the preliminary statements of this Agreement. "Owned Aircraft Participation Agreement" means a participation agreement substantially in the form of Exhibit C-1 to the Note Purchase Agreement, as the same may be amended, supplemented or otherwise modified in accordance with its terms. "Owner Trustee" means, with respect to any Indenture pertaining to a Leased Aircraft, the Owner Trustee (as defined therein) not in its individual capacity but solely as trustee under the related owner trust agreement, together with any successor trustee appointed pursuant to such owner trust agreement. "Participation Agreement" means, collectively, any Leased Aircraft Participation Agreement and any Owned Aircraft Participation Agreement. "Payee" has the meaning assigned to such term in Section 2.4(e). "Paying Agent" means WTC, as paying agent under each Escrow and Paying Agent Agreement, together with its successors in such capacity. 17 22 "Performing Equipment Note" means an Equipment Note issued pursuant to an Indenture with respect to which no payment default has occurred and is continuing (without giving effect to any Acceleration); provided that in the event of a bankruptcy proceeding involving Atlas under Title 11 of the United States Code (the "Bankruptcy Code"), (i) any payment default existing during the 60-day period under Section 1110(a)(1)(A) of the Bankruptcy Code (or such longer period as may apply under Section 1110(b) of the Bankruptcy Code) (the "Section 1110 Period") shall not be taken into consideration, unless during the Section 1110 Period the trustee in such proceeding or Atlas refuses to assume or agree to perform its obligations under the Lease related to such Equipment Note (in the case of a Leased Aircraft) or under the Indenture related to such Equipment Note (in the case of an Owned Aircraft) and (ii) any payment default occurring after the date of the order of relief in such proceeding shall not be taken into consideration if such payment default is cured under Section 1110(a)(1)(B) of the Bankruptcy Code before the later of 30 days after the date of such default or the expiration of the Section 1110 Period. "Performing Note Deficiency" means any time that less than 65% of the then aggregate outstanding principal amount of all Equipment Notes are Performing Equipment Notes. "Person" means any individual, corporation, partnership, joint venture, association, limited liability company, joint-stock company, trust, trustee, unincorporated organization or government or any agency or political subdivision thereof. "Placement Agents" means Morgan Stanley & Co. Incorporated, BT Alex. Brown Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co. "Placement Agreement" means the Placement Agreement dated January 27, 1998 among the Placement Agents and Atlas, relating to the purchase of the Certificates by the Placement Agents, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Pool Balance" means, with respect to each Trust or the Certificates issued by any Trust, as of any date, (i) the original aggregate face amount of the Certificates of such Trust less (ii) the aggregate amount of all payments made in respect of the Certificates of such Trust or in respect of Deposits relating to such Trust other than payments made in respect of interest or premium thereon or reimbursement of any costs and expenses in connection therewith. The Pool Balance for each Trust or for the Certificates issued by any Trust as of any Distribution Date shall be computed after giving effect to any special distribution with respect to unused Deposits, payment of principal of the Equipment Notes or payment with respect to other Trust Property held in such Trust and the distribution thereof to be made on that date. 18 23 "Proceeding" means any suit in equity, action at law or other judicial or administrative proceeding. "PTC Event of Default" means, with respect to each Trust Agreement, the failure to pay within 10 Business Days of the due date thereof: (i) the outstanding Pool Balance of the applicable Class of Certificates on the Final Legal Distribution Date for such Class or (ii) interest due on such Certificates on any Distribution Date (unless the Subordination Agent shall have made an Interest Drawing, or a withdrawal from the Cash Collateral Account, with respect thereto in an aggregate amount sufficient to pay such interest and shall have distributed such amount to the Trustee entitled thereto). "Rating Agencies" means, collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Certificates and which shall then be rating the Certificates. The initial Rating Agencies will be Moody's, Standard & Poor's and Fitch. "Ratings Confirmation" means, with respect to any action proposed to be taken, a written confirmation from each of the Rating Agencies that such action would not result in (i) a reduction of the rating for any Class of Certificates below the then current rating for such Class of Certificates or (ii) a withdrawal or suspension of the rating of any Class of Certificates. "Registration Rights Agreement" means the Registration Rights Agreement dated as of the date hereof, among the Placement Agents, the Trustees and Atlas, as amended, supplemented or otherwise modified from time to time in accordance with its terms. "Regular Distribution Dates" means each January 2 and July 2, commencing on July 2, 1998; provided, however, that, if any such day shall not be a Business Day, the related distribution shall be made on the next succeeding Business Day without additional interest. "Replacement Liquidity Facility" means, for any Liquidity Facility, an irrevocable revolving credit agreement in substantially the form of the replaced Liquidity Facility, including reinstatement provisions, or in such other form (which may include a letter of credit) as shall permit the Rating Agencies to confirm in writing their respective ratings then in effect for the Certificates (before downgrading of such ratings, if any, as a result of the downgrading of the applicable Liquidity Provider), in a face amount (or in an aggregate face amount) equal to the amount of interest payable on the Certificates of such Trust (at the Stated Interest Rate for such Trust, and without regard to expected future principal payments) on the three Regular Distribution Dates following the date of replacement of such Liquidity Facility and issued by a Person (or Persons) having unsecured short-term debt ratings issued by the Rating Agencies which are equal to or higher than the Threshold Rating. Without limitation of the form that a Replacement Liquidity Facility 19 24 otherwise may have pursuant to the preceding sentence, a Replacement Liquidity Facility for any Class of Certificates may have a stated expiration date earlier than 15 days after the Final Maturity Date of such Class of Certificates so long as such Replacement Liquidity Facility provides for a Non-Extension Drawing as contemplated by Section 3.6(d) hereof. "Replacement Liquidity Provider" means a Person who issues a Replacement Liquidity Facility. "Required Amount" means, with respect to each Liquidity Facility, or the Cash Collateral Account, for any Class, for any day, the sum of the aggregate amount of interest, calculated at the rate per annum equal to the Stated Interest Rate for the related Class of Certificates, that would be payable on such Class of Certificates on each of the three successive Regular Distribution Dates immediately following such day or, if such day is a Regular Distribution Date, on such day and the succeeding two Regular Distribution Dates, in each case calculated on the basis of the Pool Balance of such Class of Certificates on such date and without regard to expected future payments of principal on such Class of Certificates. "Responsible Officer" means (i) with respect to the Subordination Agent and each of the Trustees, any officer in the corporate trust administration department of the Subordination Agent or such Trustee or any other officer customarily performing functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of his knowledge of and familiarity with a particular subject, and (ii) with respect to each Liquidity Provider, any authorized officer of such Liquidity Provider. "Scheduled Payment" means, with respect to any Equipment Note, (i) any payment of principal or interest on such Equipment Note (other than an Overdue Scheduled Payment) due from the obligor thereon or (ii) any payment of interest on the corresponding Class of Certificates with funds drawn under any Liquidity Facility, which payment represents the installment of principal at the stated maturity of such installment of principal on such Equipment Note, the payment of regularly scheduled interest accrued on the unpaid principal amount of such Equipment Note, or both; provided that any payment of principal of, premium, if any, or interest resulting from the redemption or purchase of any Equipment Note shall not constitute a Scheduled Payment. "Scheduled Payment Date" means, with respect to any Scheduled Payment, the date on which such Scheduled Payment is scheduled to be made. "Series A Equipment Notes" means the 7.38% Series A Equipment Notes issued pursuant to each Indenture by the related Owner Trustee or Atlas, as the case may be, and authenticated by the Loan Trustee thereunder, and any such Equipment Notes issued in exchange therefor or replacement thereof pursuant to the terms of such Indenture. 20 25 "Series B Equipment Notes" means the 7.68% Series B Equipment Notes issued pursuant to each Indenture by the related Owner Trustee or Atlas, as the case may be, and authenticated by the Loan Trustee thereunder, and any such Equipment Notes issued in exchange therefor or replacement thereof pursuant to the terms of such Indenture. "Series C Equipment Notes" means the 8.01% Series C Equipment Notes issued pursuant to each Indenture by the related Owner Trustee or Atlas, as the case may be, and authenticated by the Loan Trustee thereunder, and any such Equipment Notes issued in exchange therefor or replacement thereof pursuant to the terms of such Indenture. "Special Distribution Date" means, with respect to any Special Payment, the date chosen by the Subordination Agent pursuant to Section 2.4(a) for the distribution of such Special Payment in accordance with this Agreement. "Special Payment" means any payment (other than a Scheduled Payment) in respect of, or any proceeds of, any Equipment Note or Trust Indenture Estate (as defined in each Indenture). "Special Payments Account" means the Eligible Deposit Account created pursuant to Section 2.2 as a sub- account to the Collection Account. "Standard & Poor's" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. "Stated Expiration Date" has the meaning specified in Section 3.6(d). "Stated Interest Rate" means (i) with respect to the Class A Certificates, 7.38% per annum, (ii) with respect to the Class B Certificates, 7.68% per annum and (iii) with respect to the Class C Certificates, 8.01% per annum, and in each case, plus an additional margin equal to 0.50% per annum, from and including August 9, 1998, in the event no Registration Event (as defined in the Registration Rights Agreement) occurs on or prior to the 180th day after the Closing Date (provided that any such additional margin shall cease to be in effect from and including the date on which such Registration Event occurs); provided that if the Shelf Registration Statement (as defined in the Registration Rights Agreement) ceases to be effective at any time during the period specified by Section 2(b) of the Registration Rights Agreement for more than 60 days, whether or not consecutive, during any 12-month period, the Stated Interest Rate shall be increased by 0.50% per annum from the 61st day of the applicable 12-month period such Shelf Registration Statement ceases to be effective until such time as the Shelf Registration Statement again becomes effective. "Subordination Agent" has the meaning assigned to it in the preliminary statements to this Agreement. 21 26 "Subordination Agent Incumbency Certificate" has the meaning assigned to such term in Section 2.5(a). "Subordination Agent Representatives" has the meaning assigned to such term in Section 2.5(a). "Substitute Aircraft" shall have the meaning set forth in the Note Purchase Agreement. "Successor Trusts" means, collectively, Atlas Air Pass Through Trust 1998-1A-S, Atlas Air Pass Through Trust 1998-1B-S and Atlas Air Pass Through Trust 1998-1C-S. "Tax" and "Taxes" mean any and all taxes, fees, levies, duties, tariffs, imposts, and other charges of any kind (together with any and all interest, penalties, loss, damage, liability, expense, additions to tax and additional amounts or costs incurred or imposed with respect thereto) imposed or otherwise assessed by the United States of America or by any state, local or foreign government (or any subdivision or agency thereof) or other taxing authority, including, without limitation: taxes or other charges on or with respect to income, franchises, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, social security, workers' compensation, unemployment compensation, or net worth and similar charges; taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer, value added, taxes on goods and services, gains taxes, license, registration and documentation fees, customs duties, tariffs, and similar charges. "Tax Letter" means, collectively, the Tax Letter dated as of February 9, 1998, between Atlas and ABN AMRO with respect to the Class A Liquidity Facility and all tax letters entered into between Atlas and any Replacement Liquidity Provider. "Termination Notice" with respect to any Liquidity Facility has the meaning assigned to such term in such Liquidity Facility. "Threshold Rating" means the short-term unsecured debt rating of P-1 by Moody's; A-1+ by Standard & Poor's, and F1+ by Fitch in the case of the Class A Liquidity Provider, and the short-term unsecured debt rating of P-1 by Moody's, A-1 by Standard & Poor's and F1 by Fitch, in the case of the Class B Liquidity Provider and the Class C Liquidity Provider. "Transfer" means the transfers contemplated by the Assignment and Assumption Agreements. "Treasury Regulations" means regulations, including proposed or temporary regulations, promulgated under the Code. References herein to specific provisions of 22 27 proposed or temporary regulations shall include analogous provisions of final Treasury Regulations or other successor Treasury Regulations. "Triggering Event" means (x) the occurrence of an Indenture Default under all of the Indentures resulting in a PTC Event of Default with respect to the most senior Class of Certificates then Outstanding, (y) the Acceleration of all of the outstanding Equipment Notes or (z) the occurrence of an Atlas Bankruptcy Event. "Trust" means any of the Class A Trust, the Class B Trust or the Class C Trust. "Trust Accounts" has the meaning assigned to such term in Section 2.2(a). "Trust Agreement" means any of the Class A Trust Agreement, the Class B Trust Agreement or the Class C Trust Agreement. "Trust Property" with respect to any Trust, has the meaning set forth in the Trust Agreement for such Trust. "Trustee" means any of the Class A Trustee, the Class B Trustee or the Class C Trustee. "Trustee Incumbency Certificate" has the meaning assigned to such term in Section 2.5(a). "Trustee Representatives" has the meaning assigned to such term in Section 2.5(a). "Written Notice" means, from the Subordination Agent, any Trustee or Liquidity Provider, a written instrument executed by the Designated Representative of such Person. An invoice delivered by a Liquidity Provider pursuant to Section 3.1 in accordance with its normal invoicing procedures shall constitute Written Notice under such Section. "WTC" has the meaning assigned to such term in the recital of parties to this Agreement. 23 28 ARTICLE II TRUST ACCOUNTS; CONTROLLING PARTY SECTION 2.1. Agreement to Terms of Subordination; Payments from Monies Received Only. (a) Each Trustee hereby acknowledges and agrees to the terms of subordination set forth in this Agreement in respect of each Class of Certificates and agrees to enforce such provisions and cause all payments in respect of the Equipment Notes and the Liquidity Facilities to be applied in accordance with the terms of this Agreement. In addition, each Trustee hereby agrees to cause the Equipment Notes purchased by the related Trust to be registered in the name of the Subordination Agent or its nominee, as agent and trustee for such Trustee, to be held in trust by the Subordination Agent solely for the purpose of facilitating the enforcement of the subordination and other provisions of this Agreement. (b) Except as otherwise expressly provided in the next succeeding sentence of this Section 2.1, all payments to be made by the Subordination Agent hereunder shall be made only from amounts received by it that constitute Scheduled Payments, Special Payments, payments under Section 9.1 of the Participation Agreements or payments under Sections 6 and 7 of the Note Purchase Agreement, and only to the extent that the Subordination Agent shall have received sufficient income or proceeds therefrom to enable it to make such payments in accordance with the terms hereof. Each of the Trustees and the Subordination Agent hereby agrees and, as provided in each Trust Agreement, each Certificateholder, by its acceptance of a Certificate, and each Liquidity Provider, by entering into the Liquidity Facility to which it is a party, has agreed to look solely to such amounts to the extent available for distribution to it as provided in this Agreement and to the relevant Deposits and that none of the Trustees, Owner Trustees, Loan Trustees, Owner Participants nor the Subordination Agent is personally liable to any of them for any amounts payable or any liability under this Agreement, any Trust Agreement, any Liquidity Facility or such Certificate, except (in the case of the Subordination Agent) as expressly provided herein or (in the case of the Trustees) as expressly provided in each Trust Agreement or (in the case of the Owner Trustees and the Loan Trustees) as expressly provided in any Operative Agreement. SECTION 2.2. Trust Accounts. (a) Upon the execution of this Agreement, the Subordination Agent shall establish and maintain in its name (i) the Collection Account as an Eligible Deposit Account, bearing a designation clearly indicating that the funds deposited therein are held in trust for the benefit of the Trustees, the Certificateholders and the Liquidity Providers, and (ii) as a sub-account in the Collection Account, the Special Payments Account as an Eligible Deposit Account, bearing a designation clearly indicating that the funds deposited therein are held in trust for the benefit of the Trustees, the Certificateholders and the Liquidity Providers. The Subordination Agent shall establish and maintain the Cash Collateral Accounts pursuant to and under the circumstances set forth in Section 3.6(f) hereof. Upon such establishment and maintenance under Section 3.6(f) hereof, 24 29 the Cash Collateral Accounts shall, together with the Collection Account, constitute the "Trust Accounts" hereunder. (b) Funds on deposit in the Trust Accounts shall be invested and reinvested by the Subordination Agent in Eligible Investments selected by the Subordination Agent if such investments are reasonably available and have maturities no later than the earlier of (i) 90 days following the date of such investment and (ii) the Business Day immediately preceding the Regular Distribution Date or the date of the related distribution pursuant to Section 2.4 hereof, as the case may be, next following the date of such investment; (or, in the case of any amount on deposit in the Cash Collateral Account with respect to any Liquidity Facility (with respect to such Liquidity Facility, the "Relevant Amount"), (A) in the case of a portion of the Relevant Amount equal to the amount scheduled to be paid to the Liquidity Provider with respect to such Liquidity Facility on the Regular Distribution Date next following the date of such investment in accordance with clause (iv), (v) or (vi) of Section 3.6(f), the Business Day immediately preceding such Regular Distribution Date, or (B) in the case of a portion of the Relevant Amount equal to the Relevant Amount minus the amount described in clause (A) above, the Business Day immediately preceding the scheduled Interest Payment Date with respect to such Liquidity Facility next following the date of such investment); provided, however, that following the making of a Downgrade Drawing or a Non-Extension Drawing under any Liquidity Facility, the Subordination Agent shall invest and reinvest such amounts in Eligible Investments at the direction of Atlas; provided, however, that upon the occurrence and during the continuation of a Triggering Event, the Subordination Agent shall invest and reinvest such amounts in accordance with the written instructions of the Controlling Party. Unless otherwise expressly provided in this Agreement (including, without limitation, with respect to Investment Earnings on deposit in the Cash Collateral Accounts, Section 3.6(f) hereof), any Investment Earnings shall be deposited in the Collection Account when received by the Subordination Agent and shall be applied by the Subordination Agent in the same manner as the other amounts on deposit in the Collection Account are to be applied and any losses shall be charged against the principal amount invested, in each case net of the Subordination Agent's reasonable fees and expenses in making such investments. The Subordination Agent shall not be liable for any loss resulting from any investment, reinvestment or liquidation required to be made under this Agreement other than by reason of its willful misconduct or gross negligence. Eligible Investments and any other investment required to be made hereunder shall be held to their maturities except that any such investment may be sold (without regard to its maturity) by the Subordination Agent without instructions whenever such sale is necessary to make a distribution required under this Agreement. Uninvested funds held hereunder shall not earn or accrue interest. (c) The Subordination Agent shall possess all right, title and interest in all funds on deposit from time to time in the Trust Accounts and in all proceeds thereof (including all income thereon, except as otherwise expressly provided herein with respect to Investment Earnings). The Trust Accounts shall be held in trust by the Subordination Agent under the sole dominion and control of the Subordination Agent for the benefit of the Trustees, the Certificateholders and the Liquidity Providers, as the case may be. If, at any 25 30 time, any of the Trust Accounts ceases to be an Eligible Deposit Account, the Subordination Agent shall within 10 Business Days (or such longer period, not to exceed 30 calendar days, to which each Rating Agency may consent) establish a new Collection Account, Special Payments Account or Cash Collateral Account, as the case may be, as an Eligible Deposit Account and shall transfer any cash and/or any investments to such new Collection Account, Special Payments Account or Cash Collateral Account, as the case may be. So long as WTC is an Eligible Institution, the Trust Accounts shall be maintained with it as Eligible Deposit Accounts. SECTION 2.3. Deposits to the Collection Account and Special Payments Account. (a) The Subordination Agent shall, upon receipt thereof, deposit in the Collection Account all Scheduled Payments received by it. (b) The Subordination Agent shall, on each date when one or more Special Payments are made to the Subordination Agent as holder of the Equipment Notes, deposit in the Special Payments Account the aggregate amount of such Special Payments. SECTION 2.4. Distributions of Special Payments. (a) Notice of Special Payment. Except as provided in Section 2.4(e) below, upon receipt by the Subordination Agent, as registered holder of the Equipment Notes, of any notice of a Special Payment (or, in the absence of any such notice, upon receipt by the Subordination Agent of a Special Payment), the Subordination Agent shall promptly give notice thereof to each Trustee and the Liquidity Providers. The Subordination Agent shall promptly calculate the amount of the redemption or purchase of Equipment Notes or the amount of any Overdue Scheduled Payment, as the case may be, comprising such Special Payment under the applicable Indenture or Indentures and shall promptly send to each Trustee a Written Notice of such amount and the amount allocable to each Trust. Such Written Notice shall also set the distribution date for such Special Payment (a "Special Distribution Date"), which shall be the Business Day which immediately follows the later to occur of (x) the 15th day after the date of such Written Notice or (y) the date the Subordination Agent has received or expects to receive such Special Payment. Amounts on deposit in the Special Payments Account shall be distributed in accordance with Sections 2.4(b) and 2.4(c) hereof, as applicable. (b) Redemptions and Purchases of Equipment Notes. (i) So long as no Triggering Event shall have occurred (whether or not continuing), the Subordination Agent shall make distributions pursuant to this Section 2.4(b) of amounts on deposit in the Special Payments Account on account of the redemption, purchase (including, without limitation, a purchase resulting from a sale of the Equipment Notes permitted by Article IV hereof) or prepayment of all of the Equipment Notes issued pursuant to an Indenture on the Special Distribution Date for such Special Payment in the following order of priority: first, such amount as shall be required to pay (A) all accrued and unpaid Liquidity Expenses then in arrears plus (B) the product of (x) the aggregate amount of all accrued and unpaid Liquidity Expenses not in arrears to such Special Payment Date 26 31 multiplied by (y) a fraction, the numerator of which is the aggregate outstanding principal amount of Equipment Notes being redeemed, purchased or prepaid on such Special Payment Date and the denominator of which is the aggregate outstanding principal amount of all Equipment Notes, shall be distributed to the Liquidity Providers pari passu on the basis of the amount of Liquidity Expenses owed to each Liquidity Provider; second, such amount as shall be required to pay (A) all accrued and unpaid interest then in arrears on all Liquidity Obligations (including interest accrued and unpaid on any Interest Drawing or any Applied Provider Advance (as defined in any Liquidity Facility)) plus (B) the product of (x) the aggregate amount of all accrued and unpaid interest on all Liquidity Obligations not in arrears to such Special Payment Date (at the rate provided in the applicable Liquidity Facility) multiplied by (y) a fraction, the numerator of which is the aggregate outstanding principal amount of Equipment Notes being redeemed, purchased or prepaid on such Special Payment Date and the denominator of which is the aggregate outstanding principal amount of all Equipment Notes, shall be distributed to the Liquidity Providers pari passu on the basis of the amount of such Liquidity Obligations owed to each Liquidity Provider; third, such amount as shall be required (A) if any Cash Collateral Account had been previously funded as provided in Section 3.6(f), to fund such Cash Collateral Account up to its Required Amount shall be deposited in such Cash Collateral Account, (B) if any Liquidity Facility shall become a Downgraded Facility or a Non- Extended Facility at a time when unreimbursed Interest Drawings under such Liquidity Facility have reduced the Available Amount thereunder to zero, to deposit into the related Cash Collateral Account an amount equal to such Cash Collateral Account's Required Amount shall be deposited in such Cash Collateral Account, and (C) if, with respect to any particular Liquidity Facility, neither subclause (A) nor subclause (B) of this clause "third" are applicable, to pay or reimburse the Liquidity Provider in respect of such Liquidity Facility in an amount equal to the amount of any unreimbursed Interest Drawings under such Liquidity Facility shall be distributed to such Liquidity Provider, pari passu on the basis of the amounts of all such deficiencies and/or unreimbursed Interest Drawings; fourth, if, with respect to any particular Liquidity Facility, any amounts are to be distributed pursuant to either subclause (A) or (B) of clause "third" above, then the Liquidity Provider with respect to such Liquidity Facility shall be paid the excess of (x) the aggregate outstanding amount of unreimbursed Advances (whether or not then due) under such Liquidity Facility over (y) the Required Amount for the relevant Class, pari passu on the basis of such amounts in respect of each Liquidity Provider; fifth, such amount as shall be required to pay in full Expected Distributions to the holders of Class A Certificates on such Special Distribution Date shall be distributed to the Class A Trustee; 27 32 sixth, such amount as shall be required to pay in full Expected Distributions to the holders of Class B Certificates on such Special Distribution Date shall be distributed to the Class B Trustee; seventh, such amount as shall be required to pay in full Expected Distributions to the holders of Class C Certificates on such Special Distribution Date shall be distributed to the Class C Trustee; and eighth, the balance, if any, of such Special Payment shall be transferred to the Collection Account for distribution in accordance with Section 3.2 hereof. For the purposes of this Section 2.4(b), clause (x) of the definition of "Expected Distributions" shall be deemed to read as follows: "(x) accrued, due and unpaid interest on such Certificates together with (without duplication) accrued and unpaid interest on a portion of such Certificates equal to the outstanding principal amount of Equipment Notes being redeemed, purchased or prepaid (immediately prior to such redemption, purchase or prepayment) (excluding interest, if any, payable with respect to the Deposits related to such Trust)". (ii) Upon the occurrence of a Triggering Event (whether or not continuing), the Subordination Agent shall make distributions pursuant to this Section 2.4(b) of amounts on deposit in the Special Payments Account on account of the redemption or purchase of all of the Equipment Notes issued pursuant to an Indenture on the Special Distribution Date for such Special Payment in accordance with Section 3.3 hereof. (c) Other Special Payments. Except as provided in clause (e) below, any amounts on deposit in the Special Payments Account other than in respect of amounts to be distributed pursuant to Section 2.4(b) shall be distributed on the Special Distribution Date therefor in accordance with Article III hereof. (d) Investment of Amounts in Special Payments Account. Any amounts on deposit in the Special Payments Account prior to the distribution thereof pursuant to Section 2.4(b) or (c) shall be invested in accordance with Section 2.2(b). Investment Earnings on such investments shall be distributed in accordance with Section 2.4(b) or (c), as the case may be. (e) Certain Payments. The Subordination Agent will distribute promptly upon receipt thereof (i) any indemnity payment received by it from the Owner Participant, the Owner Trustee or Atlas in respect of any Trustee, any Liquidity Provider, any Paying Agent, any Depositary or any Escrow Agent (collectively, the "Payees") and (ii) any compensation (including, without limitation, any fees payable to any Liquidity Provider under Section 2.03 of any Liquidity Facility) received by it from the Owner Participant, the Owner Trustee or Atlas under any Operative Agreement in respect of any Payee, directly to the Payee entitled thereto. 28 33 SECTION 2.5. Designated Representatives. (a) With the delivery of this Agreement, the Subordination Agent shall furnish to each Liquidity Provider and each Trustee, and from time to time thereafter may furnish to each Liquidity Provider and each Trustee, at the Subordination Agent's discretion, or upon any Liquidity Provider's or Trustee's request (which request shall not be made more than one time in any 12-month period), a certificate (a "Subordination Agent Incumbency Certificate") of a Responsible Officer of the Subordination Agent certifying as to the incumbency and specimen signatures of the officers of the Subordination Agent and the attorney-in-fact and agents of the Subordination Agent (the "Subordination Agent Representatives") authorized to give Written Notices on behalf of the Subordination Agent hereunder. Until each Liquidity Provider and Trustee receives a subsequent Subordination Agent Incumbency Certificate, it shall be entitled to rely on the last Subordination Agent Incumbency Certificate delivered to it hereunder. (b) With the delivery of this Agreement, each Trustee shall furnish to the Subordination Agent, and from time to time thereafter may furnish to the Subordination Agent, at such Trustee's discretion, or upon the Subordination Agent's request (which request shall not be made more than one time in any 12-month period), a certificate (a "Trustee Incumbency Certificate") of a Responsible Officer of such Trustee certifying as to the incumbency and specimen signatures of the officers of such Trustee and the attorney-in-fact and agents of such Trustee (the "Trustee Representatives") authorized to give Written Notices on behalf of such Trustee hereunder. Until the Subordination Agent receives a subsequent Trustee Incumbency Certificate, it shall be entitled to rely on the last Trustee Incumbency Certificate delivered to it hereunder. (c) With the delivery of this Agreement, each Liquidity Provider shall furnish to the Subordination Agent, and from time to time thereafter may furnish to the Subordination Agent, at such Liquidity Provider's discretion, or upon the Subordination Agent's request (which request shall not be made more than one time in any 12-month period), a certificate (an "LP Incumbency Certificate") of any Responsible Officer of such Liquidity Provider certifying as to the incumbency and specimen signatures of any officer, attorney-in-fact, agent or other designated representative of such Liquidity Provider (the "LP Representatives" and, together with the Subordination Agent Representatives and the Trustee Representatives, the "Designated Representatives") authorized to give Written Notices on behalf of such Liquidity Provider hereunder. Until the Subordination Agent receives a subsequent LP Incumbency Certificate, it shall be entitled to rely on the last LP Incumbency Certificate delivered to it hereunder. SECTION 2.6. Controlling Party. (a) The Trustees and the Liquidity Providers hereby agree that, with respect to any Indenture at any given time, the Loan Trustee thereunder will be directed (i) in taking, or refraining from taking, any action under such Indenture or with respect to the Equipment Notes issued thereunder, so long as no Indenture Default has occurred and is continuing thereunder, by the holders of at least a majority of the outstanding principal amount of such Equipment Notes (provided that, for so 29 34 long as the Subordination Agent is the registered holder of the Equipment Notes, the Subordination Agent shall act with respect to this clause (i) in accordance with the directions of the Trustees (in the case of each such Trustee, with respect to the Equipment Notes issued under such Indenture and held as Trust Property of such Trust) constituting, in the aggregate, directions with respect to such principal amount of Equipment Notes), and (ii) after the occurrence and during the continuance of an Indenture Default thereunder (which, in the case of an Indenture pertaining to a Leased Aircraft, has not been cured by the applicable Owner Trustee or the applicable Owner Participant, if applicable, pursuant to Section 4.03 of such Indenture), in taking, or refraining from taking, any action under such Indenture or with respect to such Equipment Notes, including exercising remedies thereunder (including Accelerating the Equipment Notes issued thereunder or foreclosing the Lien on the Aircraft securing such Equipment Notes), by the Controlling Party. (b) The Person who shall be the "Controlling Party" with respect to any Indenture shall be: (x) the Class A Trustee; (y) upon payment of Final Distributions to the holders of Class A Certificates, the Class B Trustee; and (z) upon payment of Final Distributions to the holders of Class B Certificates, the Class C Trustee. For purposes of giving effect to the foregoing, the Trustees (other than the Controlling Party) irrevocably agree (and the Certificateholders (other than the Certificateholders represented by the Controlling Party) shall be deemed to agree by virtue of their purchase of Certificates) that the Subordination Agent, as record holder of the Equipment Notes, shall exercise its voting rights in respect of the Equipment Notes as directed by the Controlling Party and any vote so exercised shall be binding upon the Trustees and all Certificateholders. The Subordination Agent shall give written notice to all of the other parties to this Agreement promptly upon a change in the identity of the Controlling Party. Each of the parties hereto agrees that it shall not exercise any of the rights of the Controlling Party at such time as it is not the Controlling Party hereunder; provided, however, that nothing herein contained shall prevent or prohibit any Non-Controlling Party from exercising such rights as shall be specifically granted to such Non-Controlling Party hereunder and under the other Operative Agreements. (c) Notwithstanding the foregoing, at any time after 18 months from the earlier to occur of (i) the date on which the entire Available Amount under any Liquidity Facility shall have been drawn (for any reason other than a Downgrade Drawing or a Non-Extension Drawing) and remain unreimbursed, and (ii) the date on which all Equipment Notes shall have been Accelerated, the Liquidity Providers with at least two-thirds of unreimbursed Liquidity Obligations shall have the right to elect, by Written Notice to the Subordination Agent and each of the Trustees, to become the Controlling Party hereunder with respect to any Indenture at any time from and including the last day of such 18-month period. (d) The exercise of remedies by the Controlling Party under this Agreement shall be expressly limited by Section 4.1(a)(ii) hereof. 30 35 (e) The Controlling Party shall not be entitled to require or obligate any Non-Controlling Party to provide funds necessary to exercise any right or remedy hereunder. ARTICLE III RECEIPT, DISTRIBUTION AND APPLICATION OF AMOUNTS RECEIVED SECTION 3.1. Written Notice of Distribution. (a) No later than 3:00 P.M. (New York City time) on the Business Day immediately preceding each Regular Distribution Date (or Special Distribution Date for purposes of Section 2.4(b) hereof, as the case may be), each of the following Persons shall deliver to the Subordination Agent a Written Notice setting forth the following information as at the close of business on such Business Day: (i) With respect to the Class A Certificates, the Class A Trustee shall separately set forth the amounts to be paid in accordance with clause "fifth" of Section 3.2 or 2.4(b), as the case may be, hereof; (ii) With respect to the Class B Certificates, the Class B Trustee shall separately set forth the amounts to be paid in accordance with clause "sixth" of Section 3.2 or 2.4(b), as the case may be, hereof; (iii) With respect to the Class C Certificates, the Class C Trustee shall separately set forth the amounts to be paid in accordance with clause "seventh" of Section 3.2 or 2.4(b), as the case may be, hereof; (iv) With respect to each Liquidity Facility, the Liquidity Provider thereunder shall separately set forth the amounts to be paid in accordance with clauses "first", "second", "third" and "fourth" of Section 3.2 or 2.4(b), as the case may be, hereof; and (v) Each Trustee shall set forth the amounts to be paid in accordance with clause "eighth" of Section 3.2 hereof. The notices required under this Section 3.1(a) may be in the form of a schedule or similar document provided to the Subordination Agent by the parties referenced therein or by any one of them, which schedule or similar document may state that, unless there has been a prepayment of the Certificates, such schedule or similar document is to remain in effect until any substitute notice or amendment shall be given to the Subordination Agent by the party providing such notice. (b) Following the occurrence of a Triggering Event, the Subordination Agent shall request the following information from the following Persons, and each of the 31 36 following Persons shall, upon the request of the Subordination Agent, deliver a Written Notice to the Subordination Agent setting forth for such Person the following information: (i) With respect to the Class A Certificates, the Class A Trustee shall separately set forth the amounts to be paid in accordance with clauses "first" (to reimburse payments made by the Class A Certificateholders pursuant to subclause (iii) of clause "first" of Section 3.3 hereof) and "seventh" of Section 3.3 hereof; (ii) With respect to the Class B Certificates, the Class B Trustee shall separately set forth the amounts to be paid in accordance with clauses "first" (to reimburse payments made by the Class B Certificateholders pursuant to subclause (iii) of clause "first" of Section 3.3 hereof) and "eighth" of Section 3.3 hereof; (iii) With respect to the Class C Certificates, the Class C Trustee shall separately set forth the amounts to be paid in accordance with clauses "first" (to reimburse payments made by the Class C Certificateholders pursuant to subclause (iii) of clause "first" of Section 3.3 hereof) and "ninth" of Section 3.3 hereof; (iv) With respect to each Liquidity Facility, the Liquidity Provider thereunder shall separately set forth the amounts to be paid to it in accordance with subclause (iii) of clause "first" of Section 3.3 hereof and clauses "second", "third", "fourth" and "fifth" of Section 3.3 hereof; and (v) Each Trustee shall set forth the amounts to be paid in accordance with clause "sixth" of Section 3.3 hereof. (c) At such time as a Trustee or a Liquidity Provider shall have received all amounts owing to it (and, in the case of a Trustee, the Certificateholders for which it is acting) pursuant to Section 2.4, 3.2 or 3.3 hereof, as applicable, and, in the case of a Liquidity Provider, its commitment under the related Liquidity Facility shall have terminated or expired, such Person shall, by a Written Notice, so inform the Subordination Agent and each other party to this Agreement. (d) As provided in Section 6.5 hereof, the Subordination Agent shall be fully protected in relying on any of the information set forth in a Written Notice provided by any Trustee or any Liquidity Provider pursuant to paragraphs (a) through (c) above and shall have no independent obligation to verify, calculate or recalculate any amount set forth in any Written Notice delivered in accordance with such paragraphs. (e) Any Written Notice delivered by a Trustee or a Liquidity Provider, as applicable, pursuant to Section 3.1(a), 3.1(b) or 3.1(c) hereof, if made prior to 10:00 A.M. (New York City time) shall be effective on the date delivered (or if delivered later shall be effective as of the next Business Day). Subject to the terms of this Agreement, the Subordination Agent shall as promptly as practicable comply with any such instructions; 32 37 provided, however, that any transfer of funds pursuant to any instruction received after 10:00 A.M. (New York City time) on any Business Day may be made on the next succeeding Business Day. (f) In the event the Subordination Agent shall not receive from any Person any information set forth in paragraph (a) or (b) above which is required to enable the Subordination Agent to make a distribution to such Person pursuant to Section 3.2 or 3.3 hereof, the Subordination Agent shall request such information and, failing to receive any such information, the Subordination Agent shall not make such distribution(s) to such Person. In such event, the Subordination Agent shall make distributions pursuant to clauses "first" through "ninth" of Section 3.2 and clauses "first" through "ninth" of Section 3.3 to the extent it shall have sufficient information to enable it to make such distributions, and shall continue to hold any funds remaining, after making such distributions, until the Subordination Agent shall receive all necessary information to enable it to distribute any funds so withheld. (g) On such dates (but not more frequently than monthly) as any Liquidity Provider or any Trustee shall request, but in any event automatically at the end of each calendar quarter, the Subordination Agent shall send to such party a written statement reflecting all amounts on deposit with the Subordination Agent pursuant to Section 3.1(f) hereof. SECTION 3.2. Distribution of Amounts on Deposit in the Collection Account. Except as otherwise provided in Sections 2.4, 3.1(f), 3.3, 3.4 and 3.6(b), amounts on deposit in the Collection Account (or, in the case of any amount described in Section 2.4(c), on deposit in the Special Payments Account) shall be promptly distributed on each Regular Distribution Date (or, in the case of any amount described in Section 2.4(c), on the Special Distribution Date thereof) in the following order of priority and in accordance with the information provided to the Subordination Agent pursuant to Section 3.1(a) hereof: first, such amount as shall be required to pay all accrued and unpaid Liquidity Expenses owed to each Liquidity Provider shall be distributed to the Liquidity Providers pari passu on the basis of the amount of Liquidity Expenses owed to each Liquidity Provider; second, such amount as shall be required to pay in full the aggregate amount of interest accrued on all Liquidity Obligations (at the rate, or in the amount, provided in the applicable Liquidity Facility) and unpaid shall be distributed to the Liquidity Providers pari passu on the basis of the amount of such Liquidity Obligations owed to each Liquidity Provider; third, such amount as shall be required (A) if any Sub-Account of any Cash Collateral Account had been previously funded as provided in Section 3.6(f), to fund such Sub-Account up to its Required Amount shall be deposited in such Sub-Account, (B) if any Liquidity Facility shall become a Downgraded Facility or a Non-Extended 33 38 Facility at a time when unreimbursed Interest Drawings under such Liquidity Facility have reduced the Available Amount thereunder to zero, to deposit into the related Sub-Account of the related Cash Collateral Account an amount equal to such Sub-Account's Required Amount shall be deposited in such Cash Collateral Account, and (C) if, with respect to any particular Liquidity Facility, neither subclause (A) nor subclause (B) of this clause "third" is applicable, to pay or reimburse the Liquidity Provider in respect of such Liquidity Facility in an amount equal to the amount of all Liquidity Obligations then due under such Liquidity Facility (other than amounts payable pursuant to clause "first" or "second" of this Section 3.2) shall be distributed to such Liquidity Provider, pari passu on the basis of the amounts of all such deficiencies and/or unreimbursed Liquidity Obligations; fourth, if, with respect to any particular Liquidity Facility, any amounts are to be distributed pursuant to either subclause (A) or (B) of clause "third" above, then the Liquidity Provider with respect to such Liquidity Facility shall be paid the excess of (x) the aggregate outstanding amount of unreimbursed Advances (whether or not then due) under such Liquidity Facility over (y) the Required Amount for the relevant Class, pari passu on the basis of such amounts in respect of each Liquidity Provider; fifth, such amount as shall be required to pay in full Expected Distributions to the holders of the Class A Certificates on such Distribution Date shall be distributed to the Class A Trustee; sixth, such amount as shall be required to pay in full Expected Distributions to the holders of the Class B Certificates on such Distribution Date shall be distributed to the Class B Trustee; seventh, such amount as shall be required to pay in full Expected Distributions to the holders of the Class C Certificates on such Distribution Date shall be distributed to the Class C Trustee; eighth, such amount as shall be required to pay in full the aggregate unpaid amount of fees and expenses payable as of such Distribution Date to the Subordination Agent and each Trustee pursuant to the terms of this Agreement and the Trust Agreements, as the case may be, shall be distributed to the Subordination Agent and such Trustee; and ninth, the balance, if any, of any such amount remaining thereafter shall be held in the Collection Account for later distribution in accordance with this Article III. SECTION 3.3. Distribution of Amounts on Deposit Following a Triggering Event. (a) Except as otherwise provided in Sections 3.1(f) and 3.6(b) hereof, upon the occurrence of a Triggering Event and at all times thereafter, all funds in the Collection 34 39 Account or the Special Payments Account shall be promptly distributed by the Subordination Agent in the following order of priority: first, such amount as shall be required to reimburse (i) the Subordination Agent for any out-of-pocket costs and expenses actually incurred by it (to the extent not previously reimbursed) in the protection of, or the realization of the value of, the Equipment Notes or any Trust Indenture Estate, shall be applied by the Subordination Agent in reimbursement of such costs and expenses, (ii) each Trustee for any amounts of the nature described in clause (i) above actually incurred by it under the applicable Trust Agreement (to the extent not previously reimbursed), shall be distributed to such Trustee, and (iii) any Liquidity Provider or Certificateholder for payments, if any, made by it to the Subordination Agent or any Trustee in respect of amounts described in clause (i) above, shall be distributed to such Liquidity Provider or to the applicable Trustee for the account of such Certificateholder, in each such case, pari passu on the basis of all amounts described in clauses (i) through (iii) above; second, such amount remaining as shall be required to pay all accrued and unpaid Liquidity Expenses shall be distributed to each Liquidity Provider pari passu on the basis of the amount of Liquidity Expenses owed to each Liquidity Provider; third, such amount remaining as shall be required to pay accrued and unpaid interest on the Liquidity Obligations as provided in the Liquidity Facilities shall be distributed to each Liquidity Provider pari passu on the basis of the amount of such accrued and unpaid interest owed to each Liquidity Provider; fourth, such amount remaining as shall be required (A) if any Cash Collateral Account had been previously funded as provided in Section 3.6(f), unless (i) a Performing Note Deficiency exists and a Liquidity Event of Default shall have occurred and be continuing with respect to the relevant Liquidity Facility or (ii) a Final Drawing shall have occurred with respect to such Liquidity Facility, to fund such Cash Collateral Account up to its Required Amount (less the amount of any repayments of Interest Drawings under such Liquidity Facility while subclause (A)(i) above is applicable) shall be deposited in such Cash Collateral Account, (B) if any Liquidity Facility shall become a Downgraded Facility or a Non-Extended Facility at a time when unreimbursed Interest Drawings under such Liquidity Facility have reduced the Available Amount thereunder to zero, unless (i) a Performing Note Deficiency exists and a Liquidity Event of Default shall have occurred and be continuing with respect to the relevant Liquidity Facility or (ii) a Final Drawing shall have occurred with respect to such Liquidity Facility, to deposit into the related Cash Collateral Account an amount equal to such Cash Collateral Account's Required Amount (less the amount of any repayments of Interest Drawings under such Liquidity Facility while subclause (B)(i) above is applicable) shall be deposited in such Cash Collateral Account, and (C) if, with respect to any particular Liquidity Facility, neither subclause (A) nor subclause (B) of this clause "fourth" are 35 40 applicable, to pay in full the outstanding amount of all Liquidity Obligations then due under such Liquidity Facility (other than amounts payable pursuant to clause "second" or "third" of this Section 3.3) shall be distributed to such Liquidity Provider, pari passu on the basis of the amounts of all such deficiencies and/or unreimbursed Liquidity Obligations; fifth, if, with respect to any particular Liquidity Facility, any amounts are to be distributed pursuant to either subclause (A) or (B) of clause "fourth" above, then the Liquidity Provider with respect to such Liquidity Facility shall be paid the excess of (x) the aggregate outstanding amount of unreimbursed Advances (whether or not then due) under such Liquidity Facility over (y) the Required Amount for the relevant Class (less the amount of any repayments of Interest Drawings under such Liquidity Facility while subclause (A)(i) or (B)(i), as the case may be, of clause "fourth" above is applicable), pari passu on the basis of such amounts in respect of each Liquidity Provider; sixth, such amount as shall be required to reimburse or pay (i) the Subordination Agent for any Tax (other than Taxes imposed on compensation paid hereunder), expense, fee, charge or other loss incurred by or any other amount payable to the Subordination Agent in connection with the transactions contemplated hereby (to the extent not previously reimbursed), shall be applied by the Subordination Agent in reimbursement of such amount, (ii) each Trustee for any Tax (other than Taxes imposed on compensation paid under the applicable Trust Agreement), expense, fee, charge, loss or any other amount payable to such Trustee under the applicable Trust Agreements (to the extent not previously reimbursed), shall be distributed to such Trustee, and (iii) each Certificateholder for payments, if any, made by it pursuant to Section 5.2 hereof in respect of amounts described in clause (i) above, shall be distributed to the applicable Trustee for the account of such Certificateholder, in each such case, pari passu on the basis of all amounts described in clauses (i) through (iii) above; seventh, such amount remaining as shall be required to pay in full Adjusted Expected Distributions on the Class A Certificates shall be distributed to the Class A Trustee; eighth, such amount remaining as shall be required to pay in full Adjusted Expected Distributions on the Class B Certificates shall be distributed to the Class B Trustee; and ninth, such amount remaining as shall be required to pay in full Adjusted Expected Distributions on the Class C Certificates shall be distributed to the Class C Trustee. 36 41 SECTION 3.4. Other Payments. (a) Any payments received by the Subordination Agent for which no provision as to the application thereof is made in this Agreement shall be distributed by the Subordination Agent (i) in the order of priority specified in Section 3.3 hereof and (ii) to the extent received or realized at any time after the Final Distributions for each Class of Certificates have been made, in the manner provided in clause "first" of Section 3.3 hereof. (b) On any Interest Payment Date under each Liquidity Facility which is not a Distribution Date, the Subordination Agent shall pay to the Liquidity Provider under such Liquidity Facility from, and to the extent of, amounts on deposit in the Collection Account, an amount equal to the amount of interest then due and payable to such Liquidity Provider under such Liquidity Facility. (c) Except as otherwise provided in Section 3.3 hereof, if the Subordination Agent receives any Scheduled Payment after the Scheduled Payment Date relating thereto, but prior to such payment becoming an Overdue Scheduled Payment, then the Subordination Agent shall deposit such Scheduled Payment in the Collection Account and promptly distribute such Scheduled Payment in accordance with the priority of distributions set forth in Section 3.2 hereof; provided that, for the purposes of this Section 3.4(c) only, each reference in clause "eighth" of Section 3.2 to "Distribution Date" shall be deemed to mean the actual date of payment of such Scheduled Payment and each reference in clause "fifth", "sixth" or "seventh" of Section 3.2 to "Distribution Date" shall be deemed to refer to such Scheduled Payment Date. SECTION 3.5. Payments to the Trustees and the Liquidity Providers. Any amounts distributed hereunder to any Liquidity Provider shall be paid to such Liquidity Provider by wire transfer of funds to the address such Liquidity Provider shall provide to the Subordination Agent. The Subordination Agent shall provide a Written Notice of any such transfer to the applicable Liquidity Provider, as the case may be, at the time of such transfer. Any amounts distributed hereunder by the Subordination Agent to any Trustee which shall not be the same institution as the Subordination Agent shall be paid to such Trustee by wire transfer funds at the address such Trustee shall provide to the Subordination Agent. SECTION 3.6. Liquidity Facilities. (a) Interest Drawings. If on any Distribution Date, after giving effect to the subordination provisions of this Agreement, the Subordination Agent shall not have sufficient funds for the payment of any amounts due and owing in respect of accrued interest on the Class A Certificates, the Class B Certificates or the Class C Certificates (at the Stated Interest Rate for such Class of Certificates), then, prior to 12:00 noon (New York City time) on the Business Day following such Distribution Date, the Subordination Agent shall request a drawing (each such drawing, an "Interest Drawing") under each Liquidity Facility with respect to such Class of Certificates in an amount equal to the lesser of (i) of an amount sufficient to pay the amount of such accrued interest (at the Stated Interest Rate for such Class of Certificates) and (ii) the Available Amount under such 37 42 Liquidity Facility, and shall pay such amount to the Trustee with respect to such Class of Certificates in payment of such accrued interest. (b) Application of Interest Drawings. Notwithstanding anything to the contrary contained in this Agreement, (i) all payments received by the Subordination Agent in respect of an Interest Drawing under the Class A Liquidity Facility and all amounts withdrawn by the Subordination Agent from the Class A Cash Collateral Account, and payable in each case to the Class A Certificateholders, shall be promptly distributed to the Class A Trustee, (ii) all payments received by the Subordination Agent in respect of an Interest Drawing under the Class B Liquidity Facility and all amounts withdrawn by the Subordination Agent from the Class B Cash Collateral Account, and payable in each case to the Class B Certificateholders, shall be promptly distributed to the Class B Trustee and (iii) all payments received by the Subordination Agent in respect of an Interest Drawing under the Class C Liquidity Facility and all amounts withdrawn by the Subordination Agent from the Class C Cash Collateral Account, and payable in each case to the Class C Certificateholders, shall be promptly distributed to the Class C Trustee. (c) Downgrade Drawings. If at any time (i) the short-term unsecured debt rating of the Class A Liquidity Provider (with respect to the Class A Liquidity Facility) or the Guarantor (with respect to the MSCS Liquidity Facilities) issued by any Rating Agency is lower than the applicable Threshold Rating or (ii) (with respect to any MSCS Liquidity Facility) the related Guarantee Agreement ceases to be in full force and effect, becomes invalid or unenforceable or the Guarantor denies its liability thereunder (any such occurrence, a "Guarantee Event"), within 10 days (in the case of the Class A Liquidity Facility) or 3 days (in the case of the MSCS Liquidity Facilities) after receiving notice of such downgrading or Guarantee Event, as the case may be (but not later than the expiration date of the Liquidity Facility issued by the relevant Liquidity Provider (the "Downgraded Facility")), such Liquidity Provider or Atlas may arrange for a Replacement Liquidity Provider to issue and deliver a Replacement Liquidity Facility to the Subordination Agent. If a Downgraded Facility has not been replaced in accordance with the terms of this paragraph, the Subordination Agent shall, on such 10th or 3rd day, as the case may be, (or if such day is not a Business Day, on the next succeeding Business Day) (or, if earlier, the expiration date of such Downgraded Facility), request a drawing in accordance with and to the extent permitted by such Downgraded Facility (such drawing, a "Downgrade Drawing") of all available and undrawn amounts thereunder. Amounts drawn pursuant to a Downgrade Drawing shall be maintained and invested as provided in Section 3.6(f) hereof. The Liquidity Provider may also arrange for a Replacement Liquidity Provider to issue and deliver a Replacement Liquidity Facility at any time after such Downgrade Drawing so long as such Downgrade Drawing has not been reimbursed in full to the Liquidity Provider. (d) Non-Extension Drawings. If the Class A Liquidity Facility is scheduled to expire on a date (the "Stated Expiration Date") prior to the date that is 15 days after the Final Legal Distribution Date for the Class A Certificates, then, no earlier than the 60th day and no later than the 40th day prior to the then Stated Expiration Date, the 38 43 Subordination Agent shall request that the Class A Liquidity Provider extend the Stated Expiration Date for a period of 364 days after the Stated Expiration Date (unless the obligations of the Class A Liquidity Provider thereunder are earlier terminated in accordance with the Class A Liquidity Facility). The Class A Liquidity Provider shall advise the Borrower, no earlier than 40 days and no later than 25 days prior to such Stated Expiration Date, whether, in its sole discretion, it agrees to so extend the Stated Expiration Date. If, on or before such 25th day, the Class A Liquidity Facility shall not have been so extended or replaced in accordance with Section 3.6(e), or if the Class A Liquidity Provider fails irrevocably and unconditionally to advise the Borrower on or before the 25th day prior to the Stated Expiration Date then in effect that such Stated Expiration Date shall be so extended, the Subordination Agent shall, on such 25th day (or as soon as possible thereafter), in accordance with and to the extent permitted by the terms of the expiring Class A Liquidity Facility (a "Non-Extended Facility"), request a drawing under such expiring Class A Liquidity Facility (such drawing, a "Non-Extension Drawing") of all available and undrawn amounts thereunder. Amounts drawn pursuant to a Non-Extension Drawing shall be maintained and invested in accordance with Section 3.6(f) hereof. (e) Issuance of Replacement Liquidity Facility. (i) At any time, Atlas may, at its option, with cause or without cause, arrange for a Replacement Liquidity Facility to replace any Liquidity Facility for any Class of Certificates (including any Replacement Liquidity Facility provided pursuant to Section 3.6(e)(ii) hereof); provided, however, that neither ABN AMRO nor MSCS shall be replaced by Atlas as a Liquidity Provider with respect to any Class of Certificates prior to the fourth anniversary of the Closing Date unless (A) there shall have become due to such Liquidity Provider, or such Liquidity Provider shall have demanded, amounts pursuant to Section 3.01, 3.02 or 3.03 of any Liquidity Facility or pursuant to the Tax Letter and the replacement of such Liquidity Provider would reduce or eliminate the obligation to pay such amounts or Atlas determines in good faith that there is a substantial likelihood that such Liquidity Provider will have the right to claim any such amounts (unless such Liquidity Provider waives, in writing, any right it may have to claim such amounts), which determination shall be set forth in a certificate delivered by Atlas to such Liquidity Provider setting forth the basis for such determination and accompanied by an opinion of outside counsel selected by Atlas and reasonably acceptable to such Liquidity Provider verifying the legal conclusions, if any, of such certificate relating to such basis, provided that, in the case of any likely claim for such amounts based upon any proposed, or proposed change in, law, rule, regulation, interpretation, directive, requirement, request or administrative practice, such opinion may assume the adoption or promulgation of such proposed matter, (B) it shall become unlawful or impossible for such Liquidity Provider (or its Lending Office) to maintain or fund its LIBOR Advances as described in Section 3.10 of any Liquidity Facility, (C) with respect to the Class A Liquidity Facility, the short- term unsecured debt rating of such Liquidity Provider or, with respect to the MSCS Liquidity Facilities, the short-term unsecured debt rating of the Guarantor is downgraded by any Rating Agency and there is a resulting downgrade in the rating by any Rating Agency of any related Class of Certificates, (D) a Downgrade Drawing or a Non-Extension Drawing shall have occurred under any Liquidity Facility, (E) with respect to the MSCS Liquidity 39 44 Facilities, as contemplated by the Letter Agreement dated as of January 23, 1998 between MSCS and Atlas, or (F) such Liquidity Provider shall have breached any of its payment (including, without limitation, funding) obligations under any Liquidity Facility. If such Replacement Liquidity Facility is provided at any time after a Downgrade Drawing or Non- Extension Drawing has been made, all funds on deposit in the relevant Cash Collateral Account will be returned to the Liquidity Provider being replaced. (ii) If any Liquidity Provider shall determine not to extend any of its Liquidity Facility in accordance with Section 3.6(d), then such Liquidity Provider may, at its option, arrange for a Replacement Liquidity Facility to replace such Liquidity Facility during the period no earlier than 40 days and no later than 25 days prior to the then effective Stated Expiration Date of such Liquidity Facility. (iii) No Replacement Liquidity Facility arranged by Atlas or a Liquidity Provider in accordance with clause (i) or (ii) above, respectively, shall become effective and no such Replacement Liquidity Facility shall be deemed a "Liquidity Facility" under the Operative Agreements (in each case other than insofar as necessary to permit the repayment of amounts owed to the replaced Liquidity Provider), unless and until (A) each of the conditions referred to in clause (iv) below shall have been satisfied, (B) if such Replacement Liquidity Facility shall materially adversely affect the rights, remedies, interests or obligations of the Class A Certificateholders, the Class B Certificateholders or the Class C Certificateholders under any of the Operative Agreements, the applicable Trustee shall have consented, in writing, to the execution and issuance of such Replacement Liquidity Facility and (C) in the case of a Replacement Liquidity Facility arranged by a Liquidity Provider under Section 3.6(e)(ii), such Replacement Liquidity Facility is acceptable to Atlas. (iv) In connection with the issuance of each Replacement Liquidity Facility, the Subordination Agent shall (x) prior to the issuance of such Replacement Liquidity Facility, obtain written confirmation from each Rating Agency that such Replacement Liquidity Facility will not cause a reduction of any rating then in effect for any Class of Certificates by such Rating Agency (without regard to any downgrading of any rating of any Liquidity Provider being replaced pursuant to Section 3.6(c) hereof), (y) pay all Liquidity Obligations then owing to the replaced Liquidity Provider (which payment shall be made first from available funds in the Cash Collateral Account as described in clause (vii) of Section 3.6(f) hereof, and thereafter from any other available source, including, without limitation, a drawing under the Replacement Liquidity Facility) and (z) cause the issuer of the Replacement Liquidity Facility to deliver the Replacement Liquidity Facility to the Subordination Agent, together with a legal opinion opining that such Replacement Liquidity Facility is an enforceable obligation of such Replacement Liquidity Provider. (v) Upon satisfaction of the conditions set forth in clauses (iii) and (iv) of this Section 3.6(e), (w) the replaced Liquidity Facility shall terminate, (x) the 40 45 Subordination Agent shall, if and to the extent so requested by Atlas or the Liquidity Provider being replaced, execute and deliver any certificate or other instrument required in order to terminate the replaced Liquidity Facility, shall surrender the replaced Liquidity Facility to the Liquidity Provider being replaced and shall execute and deliver the Replacement Liquidity Facility and any associated Fee Letter, (y) each of the parties hereto shall enter into any amendments to this Agreement necessary to give effect to (1) the replacement of the applicable Liquidity Provider with the applicable Replacement Liquidity Provider and (2) the replacement of the applicable Liquidity Facility with the applicable Replacement Liquidity Facility and (z) the applicable Replacement Liquidity Provider shall be deemed to be a Liquidity Provider with the rights and obligations of a Liquidity Provider hereunder and under the other Operative Agreements and such Replacement Liquidity Facility shall be deemed to be a Liquidity Facility hereunder and under the other Operative Agreements. (f) Cash Collateral Accounts; Withdrawals; Investments. In the event the Subordination Agent shall draw all available amounts under the Class A Liquidity Facility, the Class B Liquidity Facility or the Class C Liquidity Facility pursuant to Section 3.6(c), 3.6(d) or 3.6(i) hereof, or in the event amounts are to be deposited in the Cash Collateral Account pursuant to subclause (B) of clause "third" of Section 2.4(b), subclause (B) of clause "third" of Section 3.2 or subclause (B) of clause "fourth" of Section 3.3, amounts so drawn or to be deposited, as the case may be, shall be deposited by the Subordination Agent in the Class A Cash Collateral Account, the Class B Cash Collateral Account or the Class C Cash Collateral Account, respectively. All amounts on deposit in each Cash Collateral Account shall be invested and reinvested in Eligible Investments in accordance with Section 2.2(b) hereof. Investment Earnings on amounts on deposit in the Cash Collateral Account with respect to each Liquidity Facility shall be deposited in the Collection Account on each Interest Payment Date under such Liquidity Facility and applied on such Interest Payment Date in accordance with Section 3.2, 3.3 or 3.4 (as applicable). The Subordination Agent shall deliver a written statement to Atlas and the Liquidity Provider one day prior to each Interest Payment Date setting forth the aggregate amount of Investment Earnings held in the Cash Collateral Accounts as of such date. In addition, from and after the date funds are so deposited, the Subordination Agent shall make withdrawals from such account as follows: (i) on each Distribution Date, the Subordination Agent shall, to the extent it shall not have received funds to pay accrued and unpaid interest due and owing on the Class A Certificates (at the Stated Interest Rate for the Class A Certificates) from any other source, withdraw from the Class A Cash Collateral Account, and pay to the Class A Trustee, an amount equal to the lesser of (x) an amount necessary to pay accrued and unpaid interest (at the Stated Interest Rate for the Class A Certificates) on such Class A Certificates and (y) the amount on deposit in the Class A Cash Collateral Account; (ii) on each Distribution Date, the Subordination Agent shall, to the extent it shall not have received funds to pay accrued and unpaid interest due and owing on 41 46 the Class B Certificates (at the Stated Interest Rate for the Class B Certificates) from any other source, withdraw from the Class B Cash Collateral Account, and pay to the Class B Trustee, an amount equal to the lesser of (x) an amount necessary to pay accrued and unpaid interest (at the Stated Interest Rate for the Class B Certificates) on such Class B Certificates and (y) the amount on deposit in the Class B Cash Collateral Account; (iii) on each Distribution Date, the Subordination Agent shall, to the extent it shall not have received funds to pay accrued and unpaid interest due and owing on the Class C Certificates (at the Stated Interest Rate for the Class C Certificates) from any other source, withdraw from the Class C Cash Collateral Account, and pay to the Class C Trustee, an amount equal to the lesser of (x) an amount necessary to pay accrued and unpaid interest (at the Stated Interest Rate for the Class C Certificates) on such Class C Certificates and (y) the amount on deposit in the Class C Cash Collateral Account; (iv) on each date on which the Pool Balance of the Class A Trust shall have been reduced by payments made to the Class A Certificateholders pursuant to Section 2.4, 3.2 or 3.3 hereof or pursuant to Section 2.03 of the Escrow and Paying Agent Agreement for such Class, the Subordination Agent shall withdraw from the Class A Cash Collateral Account such amount as is necessary so that, after giving effect to the reduction of the Pool Balance on such date (including any such reduction resulting from a prior withdrawal of amounts on deposit in the Class A Cash Collateral Account on such date), an amount equal to the sum of the Required Amount (with respect to the Class A Liquidity Facility) plus Investment Earnings on deposit in such Cash Collateral Account will be on deposit in the Class A Cash Collateral Account and shall first, pay such amount to the Class A Liquidity Provider until the Liquidity Obligations (with respect to the Class A Certificates) owing to such Liquidity Provider shall have been paid in full, and second, deposit any remaining amount in the Collection Account; (v) on each date on which the Pool Balance of the Class B Trust shall have been reduced by payments made to the Class B Certificateholders pursuant to Section 2.4, 3.2 or 3.3 hereof or pursuant to Section 2.03 of the Escrow and Paying Agent Agreement of such Class, the Subordination Agent shall withdraw from the Class B Cash Collateral Account such amount as is necessary so that, after giving effect to the reduction of the Pool Balance on such date (including any such reduction resulting from a prior withdrawal of amounts on deposit in the Class B Cash Collateral Account on such date), an amount equal to the sum of the Required Amount (with respect to the Class B Liquidity Facility) plus Investment Earnings on deposit in such Cash Collateral Account will be on deposit in the Class B Cash Collateral Account and shall first, pay such amount to the Class B Liquidity Provider until the Liquidity Obligations (with respect to the Class B Certificates) owing to such Liquidity Provider 42 47 shall have been paid in full, and second, deposit any remaining amount in the Collection Account; (vi) on each date on which the Pool Balance of the Class C Trust shall have been reduced by payments made to the Class C Certificateholders pursuant to Section 2.4, 3.2 or 3.3 hereof or pursuant to Section 2.03 of the Escrow and Paying Agent Agreement for such Class, the Subordination Agent shall withdraw from the Class C Cash Collateral Account such amount as is necessary so that, after giving effect to the reduction of the Pool Balance on such date (including any such reduction resulting from a prior withdrawal of amounts on deposit in the Class C Cash Collateral Account on such date), an amount equal to the sum of the Required Amount (with respect to the Class C Liquidity Facility) plus Investment Earnings on deposit in such Cash Collateral Account will be on deposit in the Class C Cash Collateral Account and shall first, pay such amount to the Class C Liquidity Provider until the Liquidity Obligations (with respect to the Class C Certificates) owing to such Liquidity Provider shall have been paid in full, and second, deposit any remaining amount in the Collection Account; (vii) if a Replacement Liquidity Facility for any Class of Certificates shall be delivered to the Subordination Agent following the date on which funds have been deposited into the Cash Collateral Account for such Class of Certificates, the Subordination Agent shall withdraw all amounts on deposit in such Cash Collateral Account and shall pay such amounts to the replaced Liquidity Provider until all Liquidity Obligations owed to such Person shall have been paid in full, and shall deposit any remaining amount in the Collection Account; and (viii) following the payment of Final Distributions with respect to any Class of Certificates, on the date on which the Subordination Agent shall have been notified by the Liquidity Provider for such Class of Certificates that the Liquidity Obligations owed to such Liquidity Provider have been paid in full, the Subordination Agent shall withdraw all amounts on deposit in the Cash Collateral Account in respect of such Class of Certificates and shall deposit such amount in the Collection Account. (g) Reinstatement. With respect to any Interest Drawing under the Liquidity Facility for any Trust, upon the reimbursement of the applicable Liquidity Provider for all or any part of the amount of such Interest Drawing, together with any accrued interest thereon, the Available Amount of such Liquidity Facility shall be reinstated by an amount equal to the amount of such Interest Drawing so reimbursed to the applicable Liquidity Provider but not to exceed the Maximum Commitment with respect to such Liquidity Facility; provided, however, that such Liquidity Facility shall not be so reinstated in part or in full at any time if (x) both a Performing Note Deficiency exists and a Liquidity Event of Default shall have occurred and be continuing with respect to the relevant Liquidity Facility or (y) a Final Drawing shall have occurred with respect to such Liquidity Facility. In the event that, with respect to any particular Liquidity Facility (i) funds are withdrawn from any 43 48 Cash Collateral Account pursuant to clause (i), (ii) or (iii) of Section 3.6(f) hereof or (ii) such Liquidity Facility shall become a Downgraded Facility or a Non-Extended Facility at a time when unreimbursed Interest Drawings under such Liquidity Facility have reduced the Available Amount thereunder to zero, then funds received by the Subordination Agent at any time other than (x) any time when a Liquidity Event of Default shall have occurred and be continuing with respect to such Liquidity Facility and a Performing Note Deficiency exists or (y) any time after a Final Drawing shall have occurred with respect to such Liquidity Facility shall be deposited in such Cash Collateral Account as and to the extent provided in clause "third" of Section 2.4(b), clause "third" of Section 3.2 or clause "fourth" of Section 3.3, as applicable, and applied in accordance with Section 3.6(f) hereof. (h) Reimbursement. The amount of each drawing under the Liquidity Facilities shall be due and payable, together with interest thereon, on the dates and at the rates, respectively, provided in the Liquidity Facilities. (i) Final Drawing. Upon receipt from a Liquidity Provider of a Termination Notice with respect to any Liquidity Facility, the Subordination Agent shall, not later than the date specified in such Termination Notice, in accordance with and to the extent permitted by the terms of such Liquidity Facility, request a drawing under such Liquidity Facility of all available and undrawn amounts thereunder (a "Final Drawing"). Amounts drawn pursuant to a Final Drawing shall be maintained and invested in accordance with Section 3.6(f) hereof. (j) Relation to Subordination Provisions. Interest Drawings under the Liquidity Facilities and withdrawals from the Cash Collateral Accounts, in each case, in respect of interest on the Certificates of any Class, will be distributed to the Trustee for such Class of Certificates, notwithstanding Sections 3.2, 3.3 and 3.6(h) hereof. ARTICLE IV EXERCISE OF REMEDIES SECTION 4.1. Directions from the Controlling Party. (a) (i) Following the occurrence and during the continuation of an Indenture Default under any Indenture, the Controlling Party shall direct the Subordination Agent, which in turn shall direct the Loan Trustee under such Indenture, in the exercise of remedies available to the holders of the Equipment Notes issued pursuant to such Indenture, including, without limitation, the ability to vote all such Equipment Notes in favor of Accelerating such Equipment Notes in accordance with the provisions of such Indenture. Subject to the Owner Trustees' and the Owner Participants' rights, if any, set forth in the Indentures with respect to Leased Aircraft to purchase the Equipment Notes and the provisions of the next paragraph, if the Equipment Notes issued pursuant to any Indenture have been Accelerated following an Indenture Default with respect thereto, the Controlling Party may sell, assign, contract to sell or otherwise 44 49 dispose of and deliver all (but not less than all) of such Equipment Notes to any Person at public or private sale, at any location at the option of the Controlling Party, all upon such terms and conditions as it may reasonably deem advisable in accordance with applicable law. (ii) Subject to the Owner Trustees' and the Owner Participants' rights, if any, set forth in the Indentures with respect to Leased Aircraft to purchase the Equipment Notes, and notwithstanding the foregoing, so long as any Certificates remain Outstanding, during the period ending on the date which is nine months after the earlier of (x) the Acceleration of the Equipment Notes issued pursuant to any Indenture or (y) the occurrence of a Atlas Bankruptcy Event, without the consent of each Trustee, (A) no Aircraft subject to the Lien of such Indenture or such Equipment Notes may be sold if the net proceeds from such sale would be less than the Minimum Sale Price for such Aircraft or such Equipment Notes, and (B) with respect to any Leased Aircraft, the amount and payment dates of rentals payable by Atlas under the Lease for such Aircraft may not be adjusted, if, as a result of such adjustment, the discounted present value of all such rentals would be less than 75% of the discounted present value of the rentals payable by Atlas under such Lease before giving effect to such adjustment, in each case, using the weighted average interest rate of the Equipment Notes issued pursuant to such Indenture as the discount rate. (iii) At the request of the Controlling Party, the Subordination Agent may from time to time during the continuance of an Indenture Default (and before the occurrence of a Triggering Event) commission LTV Appraisals with respect to the Aircraft subject to such Indenture. (iv) After a Triggering Event occurs and any Equipment Note becomes a Non-Performing Equipment Note, the Subordination Agent shall obtain Appraisals with respect to all of the Aircraft (the "LTV Appraisals") as soon as practicable and additional LTV Appraisals on or prior to each anniversary of the date of such initial LTV Appraisals; provided that if the Controlling Party reasonably objects to the appraised value of the Aircraft shown in such LTV Appraisals, the Controlling Party shall have the right to obtain or cause to be obtained substitute any LTV Appraisals (including any LTV Appraisals based upon physical inspection of the Aircraft). (b) The Controlling Party shall take such actions as it may reasonably deem most effectual to complete the sale or other disposition of such Aircraft or Equipment Notes. In addition, in lieu of any sale, assignment, contract to sell or other disposition, the Controlling Party may maintain possession of such Equipment Notes and continue to apply monies received in respect of such Equipment Notes in accordance with Article III hereof. In addition, in lieu of such sale, assignment, contract to sell or other disposition, or in lieu of such maintenance of possession, the Controlling Party may, subject to the terms and conditions of the related Indenture, instruct the Loan Trustee under such Indenture to foreclose on the Lien on the related Aircraft. 45 50 SECTION 4.2. Remedies Cumulative. Each and every right, power and remedy given to the Trustees, the Liquidity Providers, the Controlling Party or the Subordination Agent specifically or otherwise in this Agreement shall be cumulative and shall be in addition to every other right, power and remedy herein specifically given or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy whether specifically herein given or otherwise existing may, subject always to the terms and conditions hereof, be exercised from time to time and as often and in such order as may be deemed expedient by any Trustee, any Liquidity Provider, the Controlling Party or the Subordination Agent, as appropriate, and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or thereafter any other right, power or remedy. No delay or omission by any Trustee, any Liquidity Provider, the Controlling Party or the Subordination Agent in the exercise of any right, remedy or power or in the pursuit of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default or to be an acquiescence therein. SECTION 4.3. Discontinuance of Proceedings. In case any party to this Agreement (including the Controlling Party in such capacity) shall have instituted any Proceeding to enforce any right, power or remedy under this Agreement by foreclosure, entry or otherwise, and such Proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Person instituting such Proceeding, then and in every such case each such party shall, subject to any determination in such Proceeding, be restored to its former position and rights hereunder, and all rights, remedies and powers of such party shall continue as if no such Proceeding had been instituted. SECTION 4.4. Right of Certificateholders to Receive Payments Not to Be Impaired. Anything in this Agreement to the contrary notwithstanding but subject to each Trust Agreement, the right of any Certificateholder or any Liquidity Provider, respectively, to receive payments hereunder (including without limitation pursuant to Section 2.4, 3.2 or 3.3 hereof) when due, or to institute suit for the enforcement of any such payment on or after the applicable Distribution Date, shall not be impaired or affected without the consent of such Certificateholder or such Liquidity Provider, respectively. SECTION 4.5. Undertaking for Costs. In any Proceeding for the enforcement of any right or remedy under this Agreement or in any Proceeding against any Controlling Party or the Subordination Agent for any action taken or omitted by it as Controlling Party or Subordination Agent, as the case may be, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. The provisions of this Section do not apply to a suit instituted by the Subordination Agent, a Liquidity Provider or a Trustee or a suit by Certificateholders holding more than 10% of the original principal amount of any Class of Certificates. 46 51 ARTICLE V DUTIES OF THE SUBORDINATION AGENT; AGREEMENTS OF TRUSTEES, ETC. SECTION 5.1. Notice of Indenture Default or Triggering Event. (a) In the event the Subordination Agent shall have actual knowledge of the occurrence of an Indenture Default or a Triggering Event, as promptly as practicable, and in any event within 10 days after obtaining knowledge thereof, the Subordination Agent shall transmit by mail or courier to the Rating Agencies, the Liquidity Providers and the Trustees notice of such Indenture Default or Triggering Event, unless such Indenture Default or Triggering Event shall have been cured or waived. For all purposes of this Agreement, in the absence of actual knowledge on the part of a Responsible Officer, the Subordination Agent shall not be deemed to have knowledge of any Indenture Default or Triggering Event unless notified in writing by one or more Trustees, one or more Liquidity Providers or one or more Certificateholders. (b) Other Notices. The Subordination Agent will furnish to each Liquidity Provider and Trustee, promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and other instruments furnished to the Subordination Agent as registered holder of the Equipment Notes or otherwise in its capacity as Subordination Agent to the extent the same shall not have been otherwise directly distributed to such Liquidity Provider or Trustee, as applicable, pursuant to the express provision of any other Operative Agreement. SECTION 5.2. Indemnification. The Subordination Agent shall not be required to take any action or refrain from taking any action under Section 5.1 (other than the first sentence thereof) or Article IV hereof unless the Subordination Agent shall have been indemnified (to the extent and in the manner reasonably satisfactory to the Subordination Agent) against any liability, cost or expense (including counsel fees and expenses) which may be incurred in connection therewith. The Subordination Agent shall not be under any obligation to take any action under this Agreement and nothing contained in this Agreement shall require the Subordination Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. The Subordination Agent shall not be required to take any action under Section 5.1 (other than the first sentence thereof) or Article IV hereof, nor shall any other provision of this Agreement be deemed to impose a duty on the Subordination Agent to take any action, if the Subordination Agent shall have been advised by counsel that such action is contrary to the terms hereof or is otherwise contrary to law. SECTION 5.3. No Duties Except as Specified in Intercreditor Agreement. The Subordination Agent shall not have any duty or obligation to take or refrain from taking 47 52 any action under, or in connection with, this Agreement, except as expressly provided by the terms of this Agreement; and no implied duties or obligations shall be read into this Agreement against the Subordination Agent. The Subordination Agent agrees that it will, in its individual capacity and at its own cost and expense (but without any right of indemnity in respect of any such cost or expense under Section 7.1 hereof) promptly take such action as may be necessary to duly discharge all Liens on any of the Trust Accounts or any monies deposited therein which result from claims against it in its individual capacity not related to its activities hereunder or any other Operative Agreement. SECTION 5.4. Notice from the Liquidity Providers and Trustees. If any Liquidity Provider or Trustee has notice of an Indenture Default or a Triggering Event, such Person shall promptly give notice thereof to all other Liquidity Providers and Trustees and to the Subordination Agent, provided, however, that no such Person shall have any liability hereunder as a result of its failure to deliver any such notice. ARTICLE VI THE SUBORDINATION AGENT SECTION 6.1. Authorization; Acceptance of Trusts and Duties. Each of the Class A Trustee, the Class B Trustee and the Class C Trustee hereby designates and appoints the Subordination Agent as the agent and trustee of such Trustee under the applicable Liquidity Facility and authorizes the Subordination Agent to enter into the applicable Liquidity Facility as agent and trustee for such Trustee. Each of the Liquidity Providers and the Trustees hereby designates and appoints the Subordination Agent as the Subordination Agent under this Agreement. WTC hereby accepts the duties hereby created and applicable to it as the Subordination Agent and agrees to perform the same but only upon the terms of this Agreement and agrees to receive and disburse all monies received by it in accordance with the terms hereof. The Subordination Agent shall not be answerable or accountable under any circumstances, except (a) for its own willful misconduct or gross negligence (or ordinary negligence in the handling of funds), (b) as provided in Section 2.2 hereof and (c) for liabilities that may result from the material inaccuracy of any representation or warranty of the Subordination Agent made in its individual capacity in any Operative Agreement. The Subordination Agent shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Subordination Agent, unless it is proved that the Subordination Agent was negligent in ascertaining the pertinent facts. SECTION 6.2. Absence of Duties. The Subordination Agent shall have no duty to see to any recording or filing of this Agreement or any other document, or to see to the maintenance of any such recording or filing. SECTION 6.3. No Representations or Warranties as to Documents. The Subordination Agent in its individual capacity does not make nor shall be deemed to have 48 53 made any representation or warranty as to the validity, legality or enforceability of this Agreement or any other Operative Agreement or as to the correctness of any statement contained in any thereof, except for the representations and warranties of the Subordination Agent, made in its individual capacity, under any Operative Agreement to which it is a party. The Certificateholders, the Trustees and the Liquidity Providers make no representation or warranty hereunder whatsoever. SECTION 6.4. No Segregation of Monies; No Interest. Any monies paid to or retained by the Subordination Agent pursuant to any provision hereof and not then required to be distributed to any Trustee or any Liquidity Provider as provided in Articles II and III hereof or deposited into one or more Trust Accounts need not be segregated in any manner except to the extent required by such Articles II and III and by law, and the Subordination Agent shall not (except as otherwise provided in Section 2.2 hereof) be liable for any interest thereon; provided, however, that any payments received or applied hereunder by the Subordination Agent shall be accounted for by the Subordination Agent so that any portion thereof paid or applied pursuant hereto shall be identifiable as to the source thereof. SECTION 6.5. Reliance; Agents; Advice of Counsel. The Subordination Agent shall not incur liability to anyone in acting upon any signature, instrument, notice, resolution, request, consent, order, certificate, report, opinion, bond or other document or paper believed by it to be genuine and believed by it to be signed by the proper party or parties. As to the Pool Balance of any Trust as of any date, the Subordination Agent may for all purposes hereof rely on a certificate signed by any Responsible Officer of the applicable Trustee, and such certificate shall constitute full protection to the Subordination Agent for any action taken or omitted to be taken by it in good faith in reliance thereon. As to any fact or matter relating to the Liquidity Providers or the Trustees the manner of ascertainment of which is not specifically described herein, the Subordination Agent may for all purposes hereof rely on a certificate, signed by any Responsible Officer of the applicable Liquidity Provider or Trustee, as the case may be, as to such fact or matter, and such certificate shall constitute full protection to the Subordination Agent for any action taken or omitted to be taken by it in good faith in reliance thereon. The Subordination Agent shall assume, and shall be fully protected in assuming, that each of the Liquidity Providers and each of the Trustees are authorized to enter into this Agreement and to take all action to be taken by them pursuant to the provisions hereof, and shall not inquire into the authorization of each of the Liquidity Providers and each of the Trustees with respect thereto. In the administration of the trusts hereunder, the Subordination Agent may execute any of the trusts or powers hereof and perform its powers and duties hereunder directly or through agents or attorneys and may consult with counsel, accountants and other skilled persons to be selected and retained by it, and the Subordination Agent shall not be liable for the acts or omissions of any agent appointed with due care or for anything done, suffered or omitted in good faith by it in accordance with the advice or written opinion of any such counsel, accountants or other skilled persons. 49 54 SECTION 6.6. Capacity in Which Acting. The Subordination Agent acts hereunder solely as agent and trustee herein and not in its individual capacity, except as otherwise expressly provided in the Operative Agreements. SECTION 6.7. Compensation. The Subordination Agent shall be entitled to reasonable compensation, including expenses and disbursements, for all services rendered hereunder and shall have a priority claim to the extent set forth in Article III hereof on all monies collected hereunder for the payment of such compensation, to the extent that such compensation shall not be paid by others. The Subordination Agent agrees that it shall have no right against any Trustee or Liquidity Provider for any fee as compensation for its services as agent under this Agreement. The provisions of this Section 6.7 shall survive the termination of this Agreement. SECTION 6.8. May Become Certificateholder. The institution acting as Subordination Agent hereunder may become a Certificateholder and have all rights and benefits of a Certificateholder to the same extent as if it were not the institution acting as the Subordination Agent. SECTION 6.9. Subordination Agent Required; Eligibility. There shall at all times be a Subordination Agent hereunder which shall be a corporation organized and doing business under the laws of the United States of America or of any State or the District of Columbia having a combined capital and surplus of at least $100,000,000 (or the obligations of which, whether now in existence or hereafter incurred, are fully and unconditionally guaranteed by a corporation organized and doing business under the laws of the United States of America, any State thereof or of the District of Columbia and having a combined capital and surplus of at least $100,000,000), if there is such an institution willing and able to perform the duties of the Subordination Agent hereunder upon reasonable or customary terms. Such corporation shall be a citizen of the United States and shall be authorized under the laws of the United States or any State thereof or of the District of Columbia to exercise corporate trust powers and shall be subject to supervision or examination by federal, state or District of Columbia authorities. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of any of the aforesaid supervising or examining authorities, then, for the purposes of this Section 6.9, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Subordination Agent shall cease to be eligible in accordance with the provisions of this Section, the Subordination Agent shall resign immediately in the manner and with the effect specified in Section 8.1. SECTION 6.10. Money to Be Held in Trust. All Equipment Notes, monies and other property deposited with or held by the Subordination Agent pursuant to this Agreement shall be held in trust for the benefit of the parties entitled to such Equipment Notes, monies and other property. All such Equipment Notes, monies or other property 50 55 shall be held in the Trust Department of the institution acting as Subordination Agent hereunder. ARTICLE VII INDEMNIFICATION OF SUBORDINATION AGENT SECTION 7.1. Scope of Indemnification. The Subordination Agent shall be indemnified hereunder to the extent and in the manner described in Section 9.1 of the Participation Agreements and Section 7 of the Note Purchase Agreement. The indemnities contained in such Sections of such agreements shall survive the termination of this Agreement. ARTICLE VIII SUCCESSOR SUBORDINATION AGENT SECTION 8.1. Replacement of Subordination Agent; Appointment of Successor. The Subordination Agent may resign at any time by so notifying the Trustees and the Liquidity Providers. The Controlling Party may remove the Subordination Agent for cause by so notifying the Subordination Agent and may appoint a successor Subordination Agent. The Controlling Party shall remove the Subordination Agent if: (1) the Subordination Agent fails to comply with Section 6.9 hereof; (2) the Subordination Agent is adjudged bankrupt or insolvent; (3) a receiver or other public officer takes charge of the Subordination Agent or its property; or (4) the Subordination Agent otherwise becomes incapable of acting. If the Subordination Agent resigns or is removed or if a vacancy exists in the office of Subordination Agent for any reason (the Subordination Agent in such event being referred to herein as the retiring Subordination Agent), the Controlling Party shall promptly appoint a successor Subordination Agent. A successor Subordination Agent shall deliver (x) a written acceptance of its appointment as Subordination Agent hereunder to the retiring Subordination Agent and (y) a written assumption of its obligations hereunder and under each Liquidity Facility to each party hereto, upon which the resignation or removal of the retiring Subordination Agent shall become effective, and the successor Subordination Agent shall have all the rights, powers 51 56 and duties of the Subordination Agent under this Agreement. The successor Subordination Agent shall mail a notice of its succession to the Liquidity Providers and the Trustees. The retiring Subordination Agent shall promptly transfer its rights under each of the Liquidity Facilities and all of the property held by it as Subordination Agent to the successor Subordination Agent. If a successor Subordination Agent does not take office within 60 days after the retiring Subordination Agent resigns or is removed, the retiring Subordination Agent or one or more of the Trustees may petition any court of competent jurisdiction for the appointment of a successor Subordination Agent. If the Subordination Agent fails to comply with Section 6.9 hereof (to the extent applicable), one or more of the Trustees or one or more of the Liquidity Providers may petition any court of competent jurisdiction for the removal of the Subordination Agent and the appointment of a successor Subordination Agent. Notwithstanding the foregoing, no resignation or removal of the Subordination Agent shall be effective unless and until a successor has been appointed. No appointment of a successor Subordination Agent shall be effective unless and until the Rating Agencies shall have delivered a Ratings Confirmation. ARTICLE IX SUPPLEMENTS AND AMENDMENTS SECTION 9.1. Amendments, Waivers, etc. (a) This Agreement may not be supplemented, amended or modified without the consent of each Trustee (acting, except in the case of any amendment pursuant to Section 3.6(e)(v)(y) hereof, with the consent of holders of Certificates of the related Class evidencing interests in the related Trust aggregating not less than a majority in interest in such Trust or as otherwise authorized pursuant to the relevant Trust Agreement), the Subordination Agent and each Liquidity Provider; provided, however, that this Agreement may be supplemented, amended or modified without the consent of (x) any Trustee if such supplement, amendment or modification (i) is in accordance with Section 9.1(c) hereof or (ii) cures an ambiguity or inconsistency or does not materially adversely affect such Trustee or the holders of the related Class of Certificates and (y) any Liquidity Provider if such supplement, amendment or modification is in accordance with Section 9.1(c) hereof; provided further, however, that, if such supplement, amendment or modification (A) would (x) directly or indirectly modify or supersede, or otherwise conflict with, Section 2.2(b), Section 3.6(e), Section 3.6(f)(other than the last sentence thereof), or the second sentence of Section 10.6 (collectively, together with this proviso and Section 9.1(c), the "Atlas Provisions") or (y) otherwise adversely affect the interests of a potential Replacement Liquidity Provider or of Atlas with respect to its ability to replace any Liquidity Facility or with respect to its payment obligations under any 52 57 Financing Agreement, Leased or Owned Aircraft Indenture or (B) is made pursuant to Section 9.1(c), then such supplement, amendment or modification shall not be effective without the additional written consent of Atlas. Notwithstanding the foregoing, without the consent of each Certificateholder and the Liquidity Provider with respect to the applicable Class of Certificates, no supplement, amendment or modification of this Agreement may (i) reduce the percentage of the interest in the related Trust evidenced by the Certificates issued by such Trust necessary to consent to modify or amend any provision of this Agreement or to waive compliance therewith or (ii), except as provided in Section 9.1(c), modify Section 2.4, 3.2 or 3.3 hereof, relating to the distribution of monies received by the Subordination Agent hereunder from the Equipment Notes or pursuant to the Liquidity Facilities. Nothing contained in this Section shall require the consent of a Trustee at any time following the payment of Final Distributions with respect to the related Class of Certificates. (b) In the event that the Subordination Agent, as the registered holder of any Equipment Notes, receives a request for its consent to any amendment, modification, consent or waiver under such Equipment Notes, the Indenture pursuant to which such Equipment Notes were issued, or the related Lease, Participation Agreement or other related document, (i) if no Indenture Default shall have occurred and be continuing with respect to such Indenture, the Subordination Agent shall request directions with respect to each Series of such Equipment Notes from the Trustee of the Trust which holds such Equipment Notes and shall vote or consent in accordance with the directions of such Trustee and (ii) if any Indenture Default (which, in the case of any Indenture pertaining to a Leased Aircraft, has not been cured by the applicable Owner Trustee or the applicable Owner Participant, if applicable, pursuant to Section 4.03 of such Indenture) shall have occurred and be continuing with respect to such Indenture, the Subordination Agent will exercise its voting rights as directed by the Controlling Party, subject to Sections 4.1 and 4.4 hereof; provided that no such amendment, modification or waiver shall, without the consent of each Liquidity Provider, reduce the amount of rent, supplemental rent or stipulated loss values payable by Atlas under any Lease or reduce the amount of principal or interest payable by Atlas under any Equipment Note issued under any Indenture in respect of an Owned Aircraft. (c) If with respect to any Owned Aircraft Atlas issues Class D Certificates, this Agreement shall be amended by written agreement of Atlas and the Subordination Agent to provide for the subordination of such Class D Certificates to the Class A Certificates, the Class B Certificates and the Class C Certificates substantially in the same manner as the Class C Certificates are subordinated hereunder to the Class B and Class A Certificates. No such amendment shall materially adversely affect any Trustee. The amendment to this Agreement to give effect to the issuance of any Class D Certificates shall include, without limitation: (i) the trustee of the Class D Trust shall be added as a party to this Agreement; 53 58 (ii) the definitions of "Cash Collateral Account," "Certificate," "Class," "Equipment Notes," "Final Legal Distribution Date," "Liquidity Facilities," "Liquidity Provider," "LTV Ratio," "Stated Interest Rate," "Trust," "Trust Agreement" and "Controlling Party" shall be revised, as appropriate, to reflect the issuance of the Class D Certificates (and the subordination thereof); and (iii) provisions of this Agreement governing payments with respect to Certificates and related notices, including, without limitation, Sections 2.4, 3.1, 3.2, 3.3 and 3.6(e), shall be revised to provide for distributions on the Class D Certificates after payment of all relevant distributions on Class C Certificates. SECTION 9.2. Subordination Agent Protected. If, in the reasonable opinion of the institution acting as the Subordination Agent hereunder, any document required to be executed pursuant to the terms of Section 9.1 affects any right, duty, immunity or indemnity with respect to it under this Agreement or any Liquidity Facility, the Subordination Agent may in its discretion decline to execute such document. SECTION 9.3. Effect of Supplemental Agreements. Upon the execution of any amendment, consent or supplement hereto pursuant to the provisions hereof, this Agreement shall be and be deemed to be and shall be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Agreement of the parties hereto and beneficiaries hereof shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental agreement shall be and be deemed to be and shall be part of the terms and conditions of this Agreement for any and all purposes. In executing or accepting any supplemental agreement permitted by this Article IX, the Subordination Agent shall be entitled to receive, and shall be fully protected in relying upon, an opinion of counsel stating that the execution of such supplemental agreement is authorized or permitted by this Agreement. SECTION 9.4. Notice to Rating Agencies. Promptly following its receipt of each amendment, consent, modification, supplement or waiver contemplated by this Article IX, the Subordination Agent shall send a copy thereof to each Rating Agency. ARTICLE X MISCELLANEOUS SECTION 10.1. Termination of Intercreditor Agreement. Following payment of Final Distributions with respect to each Class of Certificates and the payment in full of all Liquidity Obligations to the Liquidity Providers and provided that there shall then be no other amounts due to the Certificateholders, the Trustees, the Liquidity Providers and the Subordination Agent hereunder or under the Trust Agreements, and that the commitment of 54 59 the Liquidity Providers under the Liquidity Facilities shall have expired or been terminated, this Agreement and the trusts created hereby shall terminate and this Agreement shall be of no further force or effect. Except as aforesaid or otherwise provided, this Agreement and the trusts created hereby shall continue in full force and effect in accordance with the terms hereof. SECTION 10.2. Intercreditor Agreement for Benefit of Trustees, Liquidity Providers and Subordination Agent. Subject to the second sentence of Section 10.6 and the provisions of Section 4.4, nothing in this Agreement, whether express or implied, shall be construed to give to any Person other than the Trustees, the Liquidity Providers and the Subordination Agent any legal or equitable right, remedy or claim under or in respect of this Agreement. SECTION 10.3. Notices. Unless otherwise expressly specified or permitted by the terms hereof, all notices, requests, demands, authorizations, directions, consents, waivers or documents provided or permitted by this Agreement to be made, given, furnished or filed shall be in writing, mailed by certified mail, postage prepaid, or by confirmed telecopy and (i) if to the Subordination Agent, addressed to at its office at: WILMINGTON TRUST COMPANY One Rodney Square 1100 N. Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Telecopy: (302) 651-8882 (ii) if to any Trustee, addressed to it at its office at: WILMINGTON TRUST COMPANY One Rodney Square 1100 N. Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Telecopy: (302) 651-8882 55 60 (iii) if to ABN AMRO as Liquidity Provider, addressed to it at its offices at: ABN AMRO BANK N.V., Chicago Branch 135 South LaSalle Street, Suite 660 Chicago, IL 60674-9135 Attention: Claudia Heldring Telecopier: 312-606-8428 and ABN AMRO BANK N.V., Chicago Branch 135 South LaSalle Street, Suite 625 Chicago, IL 60674-9135 Attention: Loan Operations Telecopier: 312-606-6893 (iv) if to MSCS as Liquidity Provider, addressed to it at its office at: MORGAN STANLEY CAPITAL SERVICES, INC. 1585 Broadway New York, NY 10036 Attention: Keith Amburgey Telecopier: 212-761-0580 Whenever any notice in writing is required to be given by any Trustee or Liquidity Provider or the Subordination Agent to any of the other of them, such notice shall be deemed given and such requirement satisfied when such notice is received. Any party hereto may change the address to which notices to such party will be sent by giving notice of such change to the other parties to this Agreement. SECTION 10.4. Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION 10.5. No Oral Modifications or Continuing Waivers. No terms or provisions of this Agreement may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party or other Person against whom enforcement of the change, waiver, discharge or termination is sought and any other party or other Person whose consent is required pursuant to this Agreement and any waiver of the terms hereof shall be effective only in the specific instance and for the specific purpose given. SECTION 10.6. Successors and Assigns. All covenants and agreements contained herein shall be binding upon, and inure to the benefit of, each of the parties hereto and the successors and assigns of each, all as herein provided. In addition, the Atlas 56 61 Provisions shall inure to the benefit of Atlas and its successors and assigns, and (without limitation of the foregoing) Atlas is hereby constituted, and agreed to be, an express third party beneficiary of the Atlas Provisions. Upon the occurrence of the Transfers contemplated by the Assignment and Assumption Agreements, the Trustee of each Class shall (without any further act) be deemed to have transferred all of its rights, title and interest in and to this Agreement to the trustee of the Successor Trust of the same Class and, thereafter, the trustee of each Successor Trust shall be deemed to be the "Trustee" of such Successor Trust with the rights and obligations of a "Trustee" hereunder and under the other Operative Agreements and each reference to a Trust of any Class herein shall be deemed a reference to the Successor Trust of such Class. SECTION 10.7. Headings. The headings of the various Articles and Sections herein and in the table of contents hereto are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. SECTION 10.8. Counterpart Form. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same agreement. SECTION 10.9. Subordination. (a) As between the Liquidity Providers, on the one hand, and the Trustees and the Certificateholders, on the other hand, this Agreement shall be a subordination agreement for purposes of Section 510 of the United States Bankruptcy Code, as amended from time to time. (b) Notwithstanding the provisions of this Agreement, if prior to the payment in full to the Liquidity Providers of all Liquidity Obligations then due and payable, any party hereto shall have received any payment or distribution in respect of Equipment Notes or any other amount under the Indentures or other Operative Agreements which, had the subordination provisions of this Agreement been properly applied to such payment, distribution or other amount, would not have been distributed to such Person, then such payment, distribution or other amount shall be received and held in trust by such Person and paid over or delivered to the Subordination Agent for application as provided herein. (c) If any Trustee, any Liquidity Provider or the Subordination Agent receives any payment in respect of any obligations owing hereunder (or, in the case of the Liquidity Providers, in respect of the Liquidity Obligations), which is subsequently invalidated, declared preferential, set aside and/or required to be repaid to a trustee, receiver or other party, then, to the extent of such payment, such obligations (or, in the case of the Liquidity Providers, such Liquidity Obligations) intended to be satisfied shall be revived and continue in full force and effect as if such payment had not been received. (d) The Trustees (on behalf of themselves and the holders of Certificates), the Liquidity Providers and the Subordination Agent confirm that the payment priorities 57 62 specified in Sections 2.4, 3.2 and 3.3 shall apply in all circumstances, notwithstanding the fact that the obligations owed to the Trustees and the holders of Certificates are secured by certain assets and the Liquidity Obligations may not be so secured. The Trustees expressly agree (on behalf of themselves and the holders of Certificates) not to assert priority over the holders of Liquidity Obligations due to their status as secured creditors in any bankruptcy, insolvency or other legal proceeding. (e) Each of the Trustees (on behalf of themselves and the holders of Certificates), the Liquidity Providers and the Subordination Agent may take any of the following actions without impairing its rights under this Agreement: (i) obtain a Lien on any property to secure any amounts owing to it hereunder, including, in the case of the Liquidity Providers, the Liquidity Obligations, (ii) obtain the primary or secondary obligation of any other obligor with respect to any amounts owing to it hereunder, including, in the case of the Liquidity Providers, any of the Liquidity Obligations, (iii) renew, extend, increase, alter or exchange any amounts owing to it hereunder, including, in the case of the Liquidity Providers, any of the Liquidity Obligations, or release or compromise any obligation of any obligor with respect thereto, (iv) refrain from exercising any right or remedy, or delay in exercising such right or remedy, which it may have, or (v) take any other action which might discharge a subordinated party or a surety under applicable law; provided, however, that the taking of any such actions by any of the Trustees, the Liquidity Providers or the Subordination Agent shall not prejudice the rights or adversely affect the obligations of any other party under this Agreement. SECTION 10.10. Governing Law. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. SECTION 10.11. Submission to Jurisdiction; Waiver of Jury Trial; Waiver of Immunity. (a) Each of the parties hereto hereby irrevocably and unconditionally: (i) submits for itself and its property in any legal action or proceeding relating to this Agreement or any other Operative Agreement, or for recognition and 58 63 enforcement of any judgment in respect hereof or thereof, to the nonexclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and the appellate courts from any thereof; (ii) consents that any such action or proceeding may be brought in such courts, and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (iii) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form and mail), postage prepaid, to each party hereto at its address set forth in Section 10.3 hereof, or at such other address of which the other parties shall have been notified pursuant thereto; and (iv) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction. (b) EACH OF THE PARTIES HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE RELATIONSHIP THAT IS BEING ESTABLISHED, including, without limitation, contract claims, tort claims, breach of duty claims and all other common law and statutory claims. Each of the parties warrants and represents that it has reviewed this waiver with its legal counsel, and that it knowingly and voluntarily waives its jury trial rights following consultation with such legal counsel. THIS WAIVER IS IRREVOCABLE, AND CANNOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. (c) The Class A Liquidity Provider hereby waives any immunity it may have from the jurisdiction of the courts of the United States of America or of any State and waives any immunity any of its properties located in the United States of America may have from attachment or execution upon a judgment entered by any such court under the United States Foreign Sovereign Immunities Act of 1976 or any similar successor legislation. 59 64 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers thereunto duly authorized, as of the day and year first above written, and acknowledge that this Agreement has been made and delivered in the City of New York, and this Agreement has become effective only upon such execution and delivery. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Trustee for each of the Trusts By /s/ JAMES P. LAWLER ------------------------------------- Name: James P. Lawler Title: Vice President ABN AMRO BANK N.V., Chicago Branch, as Class A Liquidity Provider By /s/ CLAUDIA C. HELDRING ------------------------------------- Name: Claudia C. Heldring Title: Vice President By /s/ LUKAS VAN DER HOEF ------------------------------------- Name: Lukas van der Hoef Title: Vice President MORGAN STANLEY CAPITAL SERVICES, INC. as Class B Liquidity Provider and Class C Liquidity Provider By /s/ ------------------------------------- Name: Title: EX-10.109 23 NOTE PURCHASE AGREEMENT 1 EXHIBIT 10.109 =============================================================================== NOTE PURCHASE AGREEMENT Dated as of February 9, 1998 Among ATLAS AIR, INC., WILMINGTON TRUST COMPANY, as Pass Through Trustee under each of the Pass Through Trust Agreements, as Subordination Agent and as Paying Agent, FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Escrow Agent =============================================================================== 2 INDEX TO NOTE PURCHASE AGREEMENT Page ---- SECTION 1. Financing of Aircraft............................................ 3 SECTION 2. Conditions Precedent............................................. 8 SECTION 3. Representations and Warranties................................... 8 SECTION 4. Covenants....................................................... 13 SECTION 5. Notices......................................................... 14 SECTION 6. Expenses........................................................ 14 SECTION 7. Further Assurances.............................................. 15 SECTION 8. Miscellaneous................................................... 15 SECTION 9. Governing Law................................................... 16 Schedules --------- Schedule I Aircraft and Scheduled Delivery Months Schedule II Pass Through Trust Agreements Schedule III Deposit Agreements Schedule IV Escrow and Paying Agent Agreements Schedule V Mandatory Document Terms Schedule VI Mandatory Economic Terms Schedule VII Aggregate Amortization Schedule Annex ----- Annex A Definitions Exhibits -------- Exhibit A-1 Form of Leased Aircraft Participation Agreement Exhibit A-2 Form of Lease Exhibit A-3 Form of Leased Aircraft Indenture Exhibit A-4 Form of Aircraft Purchase Agreement Assignment Exhibit A-5 Form of Leased Aircraft Trust Agreement Exhibit B Form of Delivery Notice Exhibit C-1 Form of Owned Aircraft Participation Agreement Exhibit C-2 Form of Owned Aircraft Indenture 3 NOTE PURCHASE AGREEMENT This NOTE PURCHASE AGREEMENT, dated as of February 9, 1998, among (i) ATLAS AIR, INC., a Delaware corporation (the "Company"), (ii) WILMINGTON TRUST COMPANY ("WTC"), a Delaware banking corporation, not in its individual capacity except as otherwise expressly provided herein, but solely as trustee (in such capacity together with its successors in such capacity, the "Pass Through Trustee") under each of the three separate Pass Through Trust Agreements (as defined below), (iii) WILMINGTON TRUST COMPANY, a Delaware banking corporation, as subordination agent and trustee (in such capacity together with its successors in such capacity, the "Subordination Agent") under the Intercreditor Agreement (as defined below), (iv) FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, as Escrow Agent (in such capacity together with its successors in such capacity, the "Escrow Agent") under each of the Escrow Agreements (as defined below), and (v) WILMINGTON TRUST COMPANY, a Delaware banking corporation, as Paying Agent (in such capacity together with its successors in such capacity, the "Paying Agent") under each of the Escrow Agreements. W I T N E S S E T H: WHEREAS, capitalized terms used but not defined herein shall have the meanings ascribed to such terms in Annex A hereto; WHEREAS, the Company has obtained commitments from the Airframe Manufacturer pursuant to the Purchase Agreement for the delivery of the 5 aircraft listed in Schedule I hereto (together with any aircraft substituted therefor in accordance with the Purchase Agreement and this Agreement prior to the delivery thereof, the "Aircraft"); WHEREAS, pursuant to the Pass Through Trust Agreements set forth in Schedule II hereto, and concurrently with the execution and delivery of this Agreement, separate grantor trusts (collectively, the "Pass Through Trusts" and, individually, a "Pass Through Trust") have been created to facilitate certain of the transactions contemplated hereby, including, without limitation, the issuance and sale of pass through certificates pursuant thereto (collectively, the "Certificates") to provide for all or a portion of the financing of the Aircraft; WHEREAS, the Company has entered into the Placement Agreement dated as of January 27, 1998 (the "Placement Agreement") 4 -2- with the several placement agents (the "Placement Agents") named therein, which provides that the Company will cause each Pass Through Trustee to issue and sell the Certificates to the Placement Agents; WHEREAS, concurrently with the execution and delivery of this Agreement, (i) the Escrow Agents and the Depositary entered into the Deposit Agreements set forth in Schedule III hereto (the "Deposit Agreements") whereby the applicable Escrow Agent agreed to direct the Placement Agents to make certain deposits referred to therein on the Issuance Date (the "Initial Deposits") and to permit the applicable Pass Through Trustee to make additional deposits from time to time thereafter (the Initial Deposits together with such additional deposits are collectively referred to as the "Deposits"), (ii) the Company and the Depositary entered into the Indemnity Agreement, dated as of the date hereof (the "Indemnity Agreement") and (iii) the Pass Through Trustees, the Placement Agents, the Paying Agents and the Escrow Agents entered into the Escrow and Paying Agent Agreements set forth in Schedule IV hereto (the "Escrow Agreements") whereby, among other things, (a) the Placement Agents agreed to deliver an amount equal to the amount of the Initial Deposits to the Depositary on behalf of the applicable Escrow Agent and (b) the applicable Escrow Agent, upon the Depositary receiving such amount, has agreed to deliver escrow receipts to be affixed to each Certificate; WHEREAS, prior to the delivery of each Aircraft, the Company will determine whether to enter into a leveraged lease transaction as lessee with respect to such Aircraft (a "Leased Aircraft") or to purchase as owner such Aircraft (an "Owned Aircraft") and will give to the Pass Through Trustee a Delivery Notice (as defined below) specifying its election; WHEREAS, upon receipt of a Delivery Notice with respect to an Aircraft, subject to the terms and conditions of this Agreement, the applicable Pass Through Trustees will enter into the applicable Financing Agreements relating to such Aircraft; WHEREAS, upon the delivery of each Aircraft, each Pass Through Trustee will fund its purchase of Equipment Notes with the proceeds of one or more Deposits withdrawn by the applicable Escrow Agent under the related Deposit Agreement bearing the same interest rate as the Certificates issued by such Pass Through Trust; and 5 -3- WHEREAS, concurrently with the execution and delivery of this Agreement, (i) ABN AMRO Bank N.V., acting through its Chicago Branch, a bank organized under the laws of the Netherlands, entered into a revolving credit agreement for the benefit of the Certificateholders of the Class A Pass Through Trust and Morgan Stanley Capital Services, Inc. entered into two revolving credit agreements for the benefit of the Certificateholders of the Class B Pass Through Trust and the Class C Pass Through Trust, in each case with the Subordination Agent, as agent for the Pass Through Trustee on behalf of each such Pass Through Trust (ABN AMRO Bank N.V., Chicago Branch, and Morgan Stanley Capital Services, Inc. are collectively referred to herein as the "Liquidity Providers", and the revolving credit agreements as the "Liquidity Facilities") and (ii) the Pass Through Trustee, the Liquidity Providers and the Subordination Agent entered into the Intercreditor Agreement, dated as of the date hereof (the "Intercreditor Agreement"); NOW, THEREFORE, in consideration of the foregoing premises and the mutual agreements herein contained and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Financing of Aircraft. (a) The Company confirms that it has entered into the Purchase Agreement with the Airframe Manufacturer pursuant to which the Company has agreed to purchase, and the Airframe Manufacturer has agreed to deliver, the Aircraft, all on and subject to terms and conditions specified in the Purchase Agreement. The currently scheduled delivery dates for the Aircraft are set forth in Schedule 1. The Company agrees to finance the Aircraft in the manner provided herein, all on and subject to the terms and conditions hereof and of the relevant Financing Agreements. (b) In furtherance of the foregoing, the Company agrees to give the parties hereto, the Depositary and each of the Rating Agencies not less than two Business Days' prior notice (a "Delivery Notice") of the scheduled delivery date (the "Scheduled Delivery Date") (or, in the case of a substitute Delivery Notice under Section 1(d) or (e) hereof, one Business Day's prior notice) in respect of each Aircraft under the Purchase Agreement, which notice shall: (i) specify whether the Company has elected to treat such Aircraft as a Leased Aircraft or an Owned Aircraft; 6 -4- (ii) specify the Scheduled Delivery Date of such Aircraft (which shall be a Business Day before the Cut-off Date and, except as provided in Section 1(e) hereof, the date (the "Funding Date") on which the financing therefor in the manner provided herein shall be consummated); (iii) instruct the Pass Through Trustee to instruct the relevant Escrow Agent to provide a Notice of Purchase Withdrawal to the Depositary with respect to the Equipment Notes to be issued in connection with the financing of such Aircraft; (iv) instruct the Pass Through Trustee to enter into the Participation Agreement included in the Financing Agreements with respect to such Aircraft in such form and at such a time on or before the Funding Date specified in such Delivery Notice and to perform its obligations thereunder; (v) specify the aggregate principal amount of each series of Equipment Notes to be issued, and purchased by the Pass Through Trustee, in connection with the financing of such Aircraft scheduled to be delivered on such Funding Date (which shall in all respects comply with the Mandatory Economic Terms); and (vi) if such Aircraft is to be a Leased Aircraft, certify that the related Owner Participant (A) is not an Affiliate of the Company (unless prior Rating Agency Confirmation permitting the use of an Affiliate has been obtained) and (B) based on the representations of such Owner Participant, is either (1) a Qualified Owner Participant or (2) any other person the obligations of which under the Owner Participant Agreements (as defined in the applicable Participation Agreement) are guaranteed by a Qualified Owner Participant. (c) Upon receipt of a Delivery Notice, the Pass Through Trustees shall, and shall cause the Subordination Agent to, enter into and perform their obligations under the Participation Agreement specified in such Delivery Notice, provided that such Participation Agreement and the other Lease Financing Agreements or Owner Financing Agreements to be entered into pursuant to such Participation Agreement shall be in the forms thereof annexed hereto in all material respects with such changes therein as shall have been requested by the related Owner Participant (in the case of Lease Financing Agreements) or by the placement agents of the Series D Equipment Notes, if 7 -5- any (in the case of the Owner Financing Agreements), agreed to by the Company and, if modified in any material respect (other than modifications affecting only the Owner Participants and modifications that do not materially and adversely affect the Certificateholders), as to which Rating Agency Confirmation shall have been obtained from each Rating Agency by the Company (to be delivered by the Company to the applicable Pass Through Trustee on or before the relevant Delivery Date, it being understood that if Rating Agency Confirmation shall have been received with respect to any Financing Agreements and such Financing Agreements are utilized for subsequent Aircraft (or Substitute Aircraft) without material modifications, no additional Rating Agency Confirmation shall be required); provided, however, that the relevant Financing Agreements as executed and delivered shall not vary the Mandatory Economic Terms and shall contain the Mandatory Document Terms. Notwithstanding the foregoing, if any Financing Agreement annexed hereto shall not have been reviewed by either Rating Agency prior to the Issuance Date, then, prior to the use thereof in connection with the financing of any Aircraft hereunder, the Company shall obtain from each Rating Agency a confirmation that the use of such Financing Documents would not result in (x) a reduction of the rating for any Class of Certificates below the then current rating for such Class of Certificates or (y) a withdrawal or suspension of the rating of any Class of Certificates. With respect to each Aircraft, the Company shall cause Wilmington Trust Company (or such other person that meets the eligibility requirements to act as loan trustee under the Leased Aircraft Indenture or Owned Aircraft Indenture) to execute as Loan Trustee the Financing Agreements relating to such Aircraft to which such Loan Trustee is intended to be a party, and shall concurrently therewith execute such Financing Agreements to which the Company is intended to be a party and perform its respective obligations thereunder. Upon the request of any Rating Agency, the Company shall deliver or cause to be delivered to each Rating Agency a true and complete copy of each Financing Agreement relating to the financing of each Aircraft together with a true and complete set of the closing documentation (including legal opinions) delivered to the related Loan Trustee, Subordination Agent and Pass Through Trustee under the related Participation Agreement. (d) If after giving any Delivery Notice, there shall be a delay in the delivery of an Aircraft, or if on the Scheduled Delivery Date of an Aircraft the financing thereof in the manner contemplated hereby shall not be consummated for whatever reason, the Company shall give the parties hereto prompt notice thereof. Concurrently with the giving of such notice of 8 -6- postponement or subsequently, the Company shall give the parties hereto a substitute Delivery Notice specifying the date to which such delivery and related financing shall have been re-scheduled (which shall be a Business Day before the Cut-off Date on which the Escrow Agents shall be entitled to withdraw one or more Deposits under each of the applicable Deposit Agreements to enable each applicable Pass Through Trustee to fund its purchase of the related Equipment Notes). Upon receipt of any such notice of postponement, each applicable Pass Through Trustee shall comply with its obligations under Section 5.01 of each of the Trust Supplements and thereafter the financing of the relevant Aircraft shall take place on the re-scheduled Delivery Date therefor (all on and subject to the terms and conditions of the relevant Financing Agreements) unless further postponed as provided herein. (e) Anything in this Section 1 to the contrary notwithstanding, the Company shall have the right at any time on or before the Scheduled Delivery Date of any Aircraft, and subsequent to its giving a Delivery Notice therefor, to postpone the Scheduled Delivery Date of such Aircraft so as to enable the Company to change its election to treat such Aircraft as a Leased Aircraft or an Owned Aircraft by written notice of such postponement to the other parties hereto. The Company shall subsequently give the parties hereto a substitute Delivery Notice complying with the provisions of Section 1(b) hereof and specifying the new Funding Date for such postponed Aircraft (which shall be a Business Day occurring before the Cut-off Date and on which the Escrow Agents shall be entitled to withdraw Deposits under each of the applicable Deposit Agreements sufficient to enable each applicable Pass Through Trustee to fund its purchase of the related Equipment Notes). In addition, the Company shall have the further right, anything in this Section 1 to the contrary notwithstanding, to accept delivery of an Aircraft under the Purchase Agreement on the Delivery Date thereof by utilization of bridge financing of such Aircraft and promptly thereafter give the parties hereto a Delivery Notice specifying a Funding Date not later than 60 days after the Delivery Date of such Aircraft and no later than the Cut-off Date and otherwise complying with the provisions of Section 1(b) hereof. All other terms and conditions of this Note Purchase Agreement shall apply to the financing of any such Aircraft on the re-scheduled Funding Date therefor except (i)the re-scheduled Funding Date shall be deemed the Delivery Date of such Aircraft for all purposes of this Section 1 and (ii)the related Financing Agreements shall be amended to reflect the original delivery of such Aircraft to the Company. 9 -7- (f) If the Scheduled Delivery Date for any Aircraft is delayed (a) more than 60 days beyond the last day of the month set forth opposite such Aircraft under the heading "Scheduled Delivery Months" in Schedule I hereto or (b) beyond the Delivery Period Termination Date, the Company may identify for delivery a substitute aircraft therefor meeting the following conditions (a "Substitute Aircraft"): (i) a Substitute Aircraft must be a Boeing 747-400F aircraft manufactured after 1993, so long as after giving effect thereto such substitution does not vary the Mandatory Economic Terms, and (ii) the Company shall be obligated to obtain Rating Agency Confirmation in respect of the replacement of any Aircraft by Substitute Aircraft. Upon the satisfaction of the conditions set forth above with respect to a Substitute Aircraft, the Aircraft to be replaced shall cease to be subject to this Agreement and all rights and obligations of the parties hereto concerning such Aircraft shall cease, and such Substitute Aircraft shall become and thereafter be subject to the terms and conditions of this Agreement to the same extent as such Aircraft. (g) The Company shall have no liability for the failure of any Pass Through Trustee to purchase Equipment Notes with respect to any Aircraft or Substitute Aircraft, other than the Company's obligation, if any, to pay the Deposit Make-Whole Premium pursuant to Section 4(a)(i) of this Agreement. (h) The parties agree that if, in connection with the delivery of an Aircraft or Substitute Aircraft, any Owner Participant who is to be a party to any Lease Financing Agreement or Special Financing Agreement shall not be a "Citizen of the United States" within the meaning of Section 40102(a)(15) of the Act, then the applicable Lease Financing Agreements shall be modified, consistent with the Mandatory Document Terms, to require such Owner Participant to enter into a voting trust, voting powers, control rights or similar arrangement satisfactory to the Company that (A) enables such Aircraft or Substitute Aircraft to be registered in the United States and (B) complies with the FAA regulations issued under the Act applicable thereto. (i) Anything herein to the contrary notwithstanding, the Company shall not have the right, and shall not be entitled, at any time to request the issuance of Equipment Notes of any series to any Pass Through Trustee in an aggregate principal amount in excess of the amount of the Deposits then available for withdrawal by the Escrow Agent under and in accordance with the provisions of the related Deposit Agreement. 10 -8- SECTION 2. Conditions Precedent. The obligation of the Pass Through Trustees to enter into, and to cause the Subordination Agent to enter into, any Participation Agreement as directed pursuant to a Delivery Notice and to perform its obligations under such Participation Agreement is subject to satisfaction of the following conditions: (a) no Triggering Event shall have occurred; and (b) the Company shall have delivered to each such Pass Through Trustee and each Liquidity Provider a certificate stating that (i) such Participation Agreement and the other Financing Agreements to be entered into pursuant to such Participation Agreement do not vary the Mandatory Economic Terms and contain the Mandatory Document Terms and (ii)any substantive modification of such Financing Agreements from the forms thereof attached to this Agreement do not materially and adversely affect the Certificateholders, and such certification shall be true and correct; and (c) The Company shall have delivered to each Pass Through Trustee and each Liquidity Provider a certificate stating that the Company has previously deposited with the Depositary any and all Delay Increase Amounts required to be deposited pursuant to Section 3(a) of the Indemnity Agreement and that the Maturity Date or Rescheduled Maturity Date, as the case may be, for each Deposit relating to an Aircraft with respect to which a Delivery Notice has been delivered hereunder is a date occurring on or after the Funding Date specified in such Delivery Notice, and such certification shall be true and correct. For purposes of this Section 2(c), the terms "Delay Increase Amount," "Maturity Date" and "Rescheduled Maturity Date" shall have the meanings specified in the Indemnity Agreement. Anything herein to the contrary notwithstanding, the obligation of each Pass Through Trustee to purchase Equipment Notes shall terminate on the Cut-off Date. SECTION 3. Representations and Warranties. (a) The Company represents and warrants that: (i) the Company is duly incorporated, validly existing and in good standing under the laws of the State of Delaware and is a "citizen of the United States" as defined in 49 U.S.C. Section 40102 and a U.S. Air Carrier, 11 -9- and has the full corporate power, authority and legal right under the laws of the State of Delaware to execute and deliver this Agreement and each Financing Agreement to which it will be a party and to carry out the obligations of the Company under this Agreement and each Financing Agreement to which it will be a party; (ii) the execution and delivery by the Company of this Agreement and the performance by the Company of its obligations under this Agreement have been duly authorized by the Company and will not violate its Certificate of Incorporation or by-laws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it is bound; and (iii) this Agreement constitutes the legal, valid and binding obligation of the Company, enforceable against it in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity, whether considered in a proceeding at law or in equity. (b) WTC represents and warrants that: (i) WTC is duly incorporated, validly existing and in good standing under the laws of the State of Delaware and is a "citizen of the United States" as defined in 49 U.S.C. Section 40102, and has the full corporate power, authority and legal right under the laws of the State of Delaware and the United States pertaining to its banking, trust and fiduciary powers to execute and deliver this Agreement and each Financing Agreement to which it will be a party and to carry out the obligations of WTC, in its capacity as Subordination Agent, Pass Through Trustee or Paying Agent, as the case may be, under this Agreement and each Financing Agreement to which it will be a party; (ii) the execution and delivery by WTC, in its capacity as Subordination Agent, Pass Through Trustee or Paying Agent, as the case may be, of this Agreement and the performance by WTC, in its capacity as Subordination Agent, Pass Through Trustee or Paying Agent, as the case may be, of its obligations under this Agreement have been duly authorized by WTC, in its capacity as Subordination Agent, Pass Through Trustee or Paying Agent, as the case may be, and will not violate its articles of association or by-laws or the provisions of any indenture, mortgage, contract 12 -10- or other agreement to which it is a party or by which it is bound; and (iii) this Agreement constitutes the legal, valid and binding obligations of WTC, in its capacity as Subordination Agent, Pass Through Trustee or Paying Agent, as the case may be, enforceable against it in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity, whether considered in a proceeding at law or in equity. (c) The Pass Through Trustee hereby confirms to each of the other parties hereto that its representations and warranties set forth in Section 7.15 of each Pass Through Trust Agreement set forth on Schedule II hereto are true and correct as of the date hereof. (d) The Subordination Agent represents and warrants that: (i) the Subordination Agent is duly incorporated, validly existing and in good standing under the laws of the State of Delaware, and has the full corporate power, authority and legal right under the laws of the State of Delaware and the United States pertaining to its banking, trust and fiduciary powers to execute and deliver this Agreement and each Financing Agreement to which it is or will be a party and to perform its obligations under this Agreement and each Financing Agreement to which it is or will be a party; (ii) this Agreement has been duly authorized, executed and delivered by the Subordination Agent; this Agreement constitutes the legal, valid and binding obligations of the Subordination Agent enforceable against it in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity, whether considered in a proceeding at law or in equity; (iii) none of the execution, delivery and performance by the Subordination Agent of this Agreement contravenes any law, rule or regulation of the State of Delaware or any United States governmental authority or agency regulating the Subordination Agent's banking, trust or fiduciary 13 -11- powers or any judgment or order applicable to or binding on the Subordination Agent and do not contravene the Subordination Agent's articles of association or by-laws or result in any breach of, or constitute a default under, any agreement or instrument to which the Subordination Agent is a party or by which it or any of its properties may be bound; (iv) neither the execution and delivery by the Subordination Agent of this Agreement nor the consummation by the Subordination Agent of any of the transactions contemplated hereby requires the consent or approval of, the giving of notice to, the registration with, or the taking of any other action with respect to, any Delaware governmental authority or agency or any federal governmental authority or agency regulating the Subordination Agent's banking, trust or fiduciary powers; (v) there are no Taxes payable by the Subordination Agent imposed by the State of Delaware or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by the Subordination Agent of this Agreement (other than franchise or other taxes based on or measured by any fees or compensation received by the Subordination Agent for services rendered in connection with the transactions contemplated by the Intercreditor Agreement or any of the Liquidity Facilities), and there are no Taxes payable by the Subordination Agent imposed by the State of Delaware or any political subdivision thereof in connection with the acquisition, possession or ownership by the Subordination Agent of any of the Equipment Notes (other than franchise or other taxes based on or measured by any fees or compensation received by the Subordination Agent for services rendered in connection with the transactions contemplated by the Intercreditor Agreement or any of the Liquidity Facilities); and (vi) there are no pending or threatened actions or proceedings against the Subordination Agent before any court or administrative agency which individually or in the aggregate, if determined adversely to it, would materially adversely affect the ability of the Subordination Agent to perform its obligations under this Agreement. (e) The Escrow Agent represents and warrants that: 14 -12- (i) the Escrow Agent is a national banking association duly organized, validly existing and in good standing under the laws of the United States and has the full corporate power, authority and legal right under the laws of the United States pertaining to its banking, trust and fiduciary powers to execute and deliver this Agreement, each Deposit Agreement and each Escrow Agreement and to carry out the obligations of the Paying Agent under each of the Escrow Agreements; (ii) the execution and delivery by the Escrow Agent of each of the Escrow Agreements and the performance by the Escrow Agent of its obligations hereunder and thereunder have been duly authorized by the Escrow Agent and will not violate its articles of association or by-laws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it is bound; and (iii) each of the Escrow Agreements constitutes the legal, valid and binding obligations of the Escrow Agent enforceable against it in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity, whether considered in a proceeding at law or in equity. (f) The Paying Agent represents and warrants that: (i) the Paying Agent is duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has the full corporate power, authority and legal right under the laws of the United States pertaining to its banking, trust and fiduciary powers to execute and deliver this Agreement and each Escrow Agreement and to carry out the obligations of the Paying Agent under each of the Escrow Agreements; (ii) the execution and delivery by the Paying Agent of each of the Escrow Agreements and the performance by the Paying Agent of its obligations hereunder and thereunder have been duly authorized by the Paying Agent and will not violate its articles of association or by-laws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it is bound; and 15 -13- (iii) each of the Escrow Agreements constitutes the legal, valid and binding obligations of the Paying Agent enforceable against it in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity, whether considered in a proceeding at law or in equity. SECTION 4. Covenants. (a) The Company covenants with each of the other parties hereto that: (i) on the date that the Depositary is obligated to pay the amount of the Final Withdrawal to the Paying Agent pursuant to a Deposit Agreement relating to any Trust, the Company shall pay to the Pass Through Trustee of such Trust no later than 12:30 p.m. (New York time) an amount equal to the Deposit Make-Whole Premium, if any, required to be paid in respect of such Final Withdrawal amount; (ii) subject to Section 4(a)(iv) of this Agreement, the Company shall at all times maintain its corporate existence and shall not wind up, liquidate or dissolve or take any action, or fail to take any action, that would have the effect of any of the foregoing; (iii) the Company shall at all times remain a U.S. Air Carrier (as defined in the Financing Agreements) and shall at all times be otherwise certificated and registered to the extent necessary to entitle (i) in the case of Leased Aircraft, the Owner Trustee (and the Loan Trustee as assignee of the Owner Trustee's rights under each Lease) to the rights afforded to lessors of aircraft equipment under Section 1110 and (ii) in the case of Owned Aircraft, the Loan Trustee to the rights afforded to secured parties of aircraft equipment under Section 1110; (iv) Section 13.2.1 of each Lease is hereby incorporated by reference herein; (v) the Company agrees to provide written notice to each of the parties hereto of the occurrence of the Cut-off Date no later than one Business Day after the date thereof; such notice to refer specifically to the Pass Through Trustee's obligation to assign, transfer and deliver all of its right, title and interest to the Trust Property (as defined in each Pass Through Trust Agreement) to the trustee of the Related Trust (as defined in each 16 -14- Pass Through Trust Agreement) in accordance with Section 11.01 of each Pass Through Trust Agreement; and (vi) the Company shall not issue Series D Equipment Notes pursuant to any Owned Aircraft Indenture unless it shall have obtained written confirmation from each Rating Agency that the issuance of such Series D Equipment Notes will not result in (i) a reduction of the rating for any Class of Certificates below the then current rating for such Class of Certificates or (ii) a withdrawal or suspension of the rating of any Class of Certificates. (b) WTC, in its individual capacity, covenants with each of the other parties to this Agreement that it will, immediately upon obtaining knowledge of any facts that would cast doubt upon its continuing status as a "citizen of the United States" as defined in 49 U.S.C. Section 40102 and promptly upon public disclosure of negotiations in respect of any transaction which would or might adversely affect such status, notify in writing all parties hereto of all relevant matters in connection therewith. Upon WTC giving any such notice, WTC shall, subject to Section 8.02 of any Indenture then entered into, resign as Loan Trustee in respect of such Indenture. SECTION 5. Notices. Unless otherwise specifically provided herein, all notices required or permitted by the terms of this Agreement shall be in English and in writing, and any such notice shall become effective upon being delivered personally or, if promptly confirmed by mail, when dispatched by facsimile or other written telecommunication, addressed to such party hereto at its address or facsimile number set forth below the signature of such party at the foot of this Agreement. SECTION 6. Expenses. (a) The Company agrees to pay to the Subordination Agent when due an amount or amounts equal to the fees payable to the relevant Liquidity Provider under Section 2.03 of each Liquidity Facility and the related Fee Letter (as defined in the Intercreditor Agreement) multiplied by a fraction the numerator of which shall be the then outstanding aggregate amount of the Deposits under the Deposit Agreements and the denominator of which shall be the sum of (x) the then outstanding aggregate principal amount of the Series A Equipment Notes, Series B Equipment Notes and Series C Equipment Notes issued under all of the Indentures and (y) the then outstanding aggregate amount of the Deposits under the Deposit Agreements. 17 -15- (b) So long as no Equipment Notes have been issued in respect of any Aircraft, the Company agrees to pay (i) to the Subordination Agent when due (A) the amount equal to interest on any Downgrade Advance payable under Section 3.07(e) of each Liquidity Facility minus Investment Earnings while such Downgrade Advance shall be outstanding, (B) the amount equal to interest on any Non-Extension Advance payable under Section 3.07(f) of the ABN AMRO Liquidity Facility minus Investment Earnings while such Non-Extension Advance shall be outstanding and (C) any other amounts owed to the Liquidity Provider by the Subordination Agent as borrower under each Liquidity Facility (other than amounts due as repayment of advances thereunder or as interest on such advances, except to the extent payable pursuant to clause (A) or (B)), (ii) all compensation and reimbursement of expenses, disbursements and advances payable by the Company under the Pass Through Trust Agreements, (iii) all compensation and reimbursement of expenses and disbursements payable to the Subordination Agent under the Intercreditor Agreement except with respect to any income or franchise taxes incurred by the Subordination Agent in connection with the transactions contemplated by the Intercreditor Agreement and (iv) in the event the Company requests any amendment to any Operative Agreement, all reasonable fees and expenses (including, without limitation, fees and disbursements of counsel) of the Escrow Agent and/or the Paying Agent in connection therewith. For purposes of this Section 6(b), the terms "Applied Downgrade Advance", "Downgrade Advance" and "Investment Earnings" shall have the meanings specified in each Liquidity Facility and "Non-Extension Advance" and "Applied Non-Extension Advance" shall have the meanings specified in the ABN AMRO Liquidity Facility. SECTION 7. Further Assurances. Each party hereto shall duly execute, acknowledge and deliver, or shall cause to be executed, acknowledged and delivered, all such further agreements, instruments, certificates or documents, and shall do and cause to be done such further acts and things, in any case, as any other party hereto shall reasonably request in connection with its administration of, or to carry out more effectually the purposes of, or to better assure and confirm unto it the rights and benefits to be provided under, this Agreement. SECTION 8. Miscellaneous. (a) Provided that the transactions contemplated hereby have been consummated, and except as otherwise provided for herein, the representations, warranties and agreements herein of the Company, the Subordination Agent, the Escrow Agent, the Paying Agent and the 18 -16- Pass Through Trustee, and the Company's, the Subordination Agent's, the Escrow Agent's, the Paying Agent's and the Pass Through Trustee's obligations under any and all thereof, shall survive the expiration or other termination of this Agreement and the other agreements referred to herein. (b) This Agreement may be executed in any number of counterparts (and each of the parties hereto shall not be required to execute the same counterpart). Each counterpart of this Agreement, including a signature page executed by each of the parties hereto, shall be an original counterpart of this Agreement, but all of such counterparts together shall constitute one instrument. Neither this Agreement nor any of the terms hereof may be terminated, amended, supplemented, waived or modified orally, but only by an instrument in writing signed by the party against which the enforcement of the termination, amendment, supplement, waiver or modification is sought. The index preceding this Agreement and the headings of the various Sections of this Agreement are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions hereof. The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the Company and its successors and permitted assigns, the Pass Through Trustee and its successors as Pass Through Trustee (and any additional trustee appointed) under any of the Pass Through Trust Agreements, the Escrow Agent and its successors as Escrow Agent under the Escrow Agreements, the Paying Agent and its successors as Paying Agent under the Escrow Agreements and the Subordination Agent and its successors as Subordination Agent under the Intercreditor Agreement. (c) This Agreement is not intended to, and shall not, provide any person not a party hereto (other than the Placement Agents and each of the beneficiaries of Section 6 hereof) with any rights of any nature whatsoever against any of the parties hereto, and no person not a party hereto (other than the Placement Agents and each of the beneficiaries of Section 6 hereof) shall have any right, power or privilege in respect of, or have any benefit or interest arising out of, this Agreement. SECTION 9. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. THIS AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK. [SIGNATURE PAGES FOLLOW] 19 -17- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written. ATLAS AIR, INC. By: /s/ ----------------------------- Name: Title: Address: 538 Commons Drive Golden, Colorado 80401 Attention: Chief Financial Officer Facsimile: (303) 526-5051 WILMINGTON TRUST COMPANY, not in its individual capacity, except as otherwise provided herein, but solely as Pass Through Trustee, Loan Trustee, Subordination Agent and Paying Agent, as applicable By: /s/ ----------------------------- Name: Title: Address: One Rodney Square 1100 North Market Street Wilmington, Delaware 19890-0001 Attention: Corporate Trust Administration 20 -18- FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS ESCROW AGENT By: /s/ ----------------------------- Name: Title: Address: 79 South Main Street Salt Lake City, Utah 84111 Attention: Corporate Trust Department 21 SCHEDULE I to Note Purchase Agreement ----------------------- AIRCRAFT AND SCHEDULED DELIVERY MONTHS Aircraft Scheduled Type Delivery Month - --------------- ------------------ Boeing 747-400F July 1998 Boeing 747-400F August 1998 Boeing 747-400F October 1998 Boeing 747-400F November 1998 Boeing 747-400F December 1998 22 SCHEDULE II to Note Purchase Agreement ----------------------- PASS THROUGH TRUST AGREEMENTS Pass Through Trust Agreement dated as of the Issuance Date between the Company and the Pass Through Trustee in respect of Atlas Air Pass Through Trust, Series 1998-1A-O. Pass Through Trust Agreement dated as of the Issuance Date between the Company and the Pass Through Trustee in respect of Atlas Air Pass Through Trust, Series 1998-1B-O. Pass Through Trust Agreement dated as of the Issuance Date between the Company and the Pass Through Trustee in respect of Atlas Air Pass Through Trust, Series 1998-1C-O. 23 SCHEDULE III to Note Purchase Agreement ----------------------- DEPOSIT AGREEMENTS Deposit Agreement (Class A) dated as of the Issuance Date between the Depositary and the Escrow Agent. Deposit Agreement (Class B) dated as of the Issuance Date between the Depositary and the Escrow Agent. Deposit Agreement (Class C) dated as of the Issuance Date between the Depositary and the Escrow Agent. 24 SCHEDULE IV to Note Purchase Agreement ----------------------- ESCROW AND PAYING AGENT AGREEMENTS Escrow and Paying Agent Agreement (Class A) dated as of the Issuance Date among the Escrow Agent, the Placement Agents, the Pass Through Trustee and the Paying Agent. Escrow and Paying Agent Agreement (Class B) dated as of the Issuance Date among the Escrow Agent, the Placement Agents, the Pass Through Trustee and the Paying Agent. Escrow and Paying Agent Agreement (Class C) dated as of the Issuance Date among the Escrow Agent, the Placement Agents, the Pass Through Trustee and the Paying Agent. 25 SCHEDULE V to Note Purchase Agreement MANDATORY DOCUMENT TERMS 1. May not modify in any material adverse respect the Granting Clause of the Trust Indenture Form so as to deprive the Note Holders, the Loan Participants or the Indenture Indemnitees of a first priority security interest in and mortgage lien on the Aircraft and the Lease or to eliminate any of the obligations secured thereby or otherwise modify in any material adverse respect as regards the interests of the Note Holders, the Subordination Agent, the Liquidity Providers or the Mortgagee the provisions of Article II or III or Section 4.02, 4.03, 4.04, 5.02, 5.06, 9.01(b), 10.04, 10.11 or 10.12 of the Trust Indenture Form. 2. May not modify in any material adverse respect as regards the interests of the Note Holders, the Subordination Agent, the Liquidity Providers or the Mortgagee the provisions of Section 3.2.1(e), 3.3(c), 4.7, the final sentence of 7.1.1, 10.3.1(d)(ii), 13.3, 16, 18.3 or 18.7(a) or Clause D of Annex D of the Lease Form or otherwise modify the terms of the Lease Form so as to deprive the Mortgagee of rights expressly granted to the "Mortgagee" therein. 3. May not modify in any material adverse respect as regards the interests of the Note Holders, the Subordination Agent, the Liquidity Providers or the Mortgagee the provisions of Section 5.1.9, 5.1.10, 5.1.11, 5.1.12, 7.5, 12, 15.8(a) or 15.9 of the Participation Agreement Form or of the provisions of Section 5.1.2(xxiii) or 10.1.1(a)(iv) of the Participation Agreement Form so as to eliminate the requirement to deliver to the Loan Participant or the Mortgagee, as the case may be, the legal opinions to be provided to such Persons thereunder (recognizing that the lawyers rendering such opinions may be changed) or of the provisions of Section 7.6.11(a)(ii) of the Participation Agreement Form as regards the rights of the Mortgagee thereunder or otherwise modify the terms of the Participation Agreement Form to deprive the Trustees, the Subordination Agent, the Liquidity Providers or the Mortgagee of any indemnity or right of reimbursement in its favor for Expenses or Taxes. 26 -2- 4. May not modify, in any material adverse respect as regards the interests of the Note Holders, the Subordination Agent, the Liquidity Providers or the Mortgagee, the definition of "Make Whole Amount" in Annex A to the Participation Agreement Form. Notwithstanding the foregoing, any such Mandatory Document Term may be modified to correct or supplement any such provision which may be defective or to cure any ambiguity or correct any mistake, provided that any such action shall not materially adversely affect the interests of the Note Holders, the Subordination Agent, the Liquidity Providers, the Mortgagee or the Certificateholders. 27 SCHEDULE VI to Note Purchase Agreement ----------------------- MANDATORY ECONOMIC TERMS ------------------------ Equipment Notes Obligor: Atlas Air or an Owner Trust Maximum Principal Amount: The maximum principal amount of all Equipment Notes issued with respect to an Aircraft shall not exceed the maximum principal amount of Equipment Notes indicated for such Aircraft as set forth in the Offering Memorandum in "Offering Memorandum Summary--Summary of Terms of Certificates--Equipment Notes and the Aircraft" under the column "Maximum Principal Amount of Equipment Notes". Aggregate Maximum Principal Amount: For all Boeing 747-400F Aircraft $538,915,000 The aggregate original principal amount of all Equipment Notes for all Aircraft shall not exceed the aggregate face amount of all Certificates issued on the Issuance Date. The aggregate original principal amount of all Equipment Notes of any series shall not exceed the aggregate face amount of all Certificates of the related Class issued on the Issuance Date. Initial Loan to Aircraft Value (with the value of any Aircraft equal to the value for such Aircraft set forth in the Offering Memorandum in "Offering Memorandum Summary--Summary of Terms of Certificates--Equipment Notes and the Aircraft" under the column "Appraised Value"): Series A: not in excess of 38.1% Series B: not in excess of 52.8% Series C: not in excess of 68.4% Initial Average Life (in years) for each Boeing 747-400F Aircraft from the Issuance Date: 28 -4- Series A: not less than 11.5 years or more than 15 years Series B: not less than 8.5 years or more than 12 years Series C: not less than 4.5 years or more than 7.5 years Average Life (in years): As of the Delivery Period Termination Date (or if earlier, the date of the occurrence of a Triggering Event), the average life of the Class A Certificates, the Class B Certificates and the Class C Certificates shall not be less than, respectively, 13.5 years, 10 years and 5 years or shall not extend beyond, respectively, 15 years, 11 years and 6.5 years from the Issuance Date (computed without regard to the acceleration of any Equipment Notes and after giving effect to any special distribution on the Certificates thereafter required in respect of unused Deposits). Final Expected Regular Distribution Date: Series A: not in excess of 20 years from the Issuance Date Series B: not in excess of 16 years from the Issuance Date Series C: not in excess of 12 years from the Issuance Date Debt Rate (computed on the basis of a 360-day year consisting of twelve 30-day months, payable semi-annually in arrears): Series A: 7.38% Series B: 7.68% Series C: 8.01% The interest rate applicable to each Series of Equipment Notes must be equal to the rate applicable to the Certificates issued by the corresponding Pass Through Trust. Payment Due Rates: Debt Rate plus 2% per annum Payment Dates: January 2 and July 2 29 -5- Make-Whole Amounts: As provided in Article II of the form of Trust Indenture marked as Exhibit A-3 of the Note Purchase Agreement (the "Trust Indenture Form") or the Owned Aircraft Indenture marked as Exhibit C-2 of the Note Purchase Agreement Redemption and As provided in Article II of the Trust Purchase: Indenture Form Lease Term: The Base Lease Term shall expire by its terms on or after final maturity date of the related Series A Equipment Notes Lease Payment Dates: January 2 and July 2 Minimum Rent: Basic Rent due and payable on each Payment Date shall be at least sufficient to pay in full, as of such Payment Date (assuming timely payment of the related Equipment Notes prior to such Date), the aggregate principal amount of scheduled installments due on the related Equipment Notes outstanding on such Payment Date, together with accrued and unpaid interest thereon Supplemental Rent: Sufficient to cover the sums described in clauses (a) through (d) of such term as defined in Annex A to the form of Lease (the "Lease Form") marked as Exhibit A-2 of the Note Purchase Agreement Stipulated Loss Value: At all times equal to or greater than the then outstanding principal amount of the related Equipment Notes together with accrued interest thereon Termination Value: At all times equal to or greater than the then outstanding principal amount of the related Equipment Notes together with accrued interest thereon All-risk Hull Not less than the Stipulated Loss Value, Insurance: subject to Lessee's right to self-insure on terms no more favorable to Lessee in 30 -6- any material respect than those set forth in Section G of Annex D to the Lease Form Minimum Liability As set forth in Schedule 1 to the Lease Insurance Amount: Form Past Due Rate: As set forth in Schedule 1 to the Lease Form SLV Rate: As set forth in Schedule 1 to the Lease Form Participation Agreement Mortgagee, Subordination Agent, Liquidity Providers, Pass Through Trustees, Escrow Agents and Note Holders shall be indemnified against Expenses and Taxes to the extent set forth in Section 9 of the form of the Participation Agreement marked as Exhibit A-1 to the Note Purchase Agreement (the "Participation Form") 31 SCHEDULE VII to Note Purchase Agreement ----------------------- AGGREGATE AMORTIZATION SCHEDULE
1998-1A Trust 1998-1B Trust 1998-1C Trust Scheduled Scheduled Scheduled Principal Principal Principal Date Payment Payment Payment - ------------------- -------------------- ------------------- -------------------- January 2, 1999 $ 2,397,500 $ 3,848,330 $ 9,840,000 July 2, 1999 1,202,214 462,390 1,857,739 January 2, 2000 4,802,928 924,780 8,946,554 July 2, 2000 1,202,214 462,390 1,929,568 January 2, 2001 4,802,928 924,780 9,654,226 July 2, 2001 1,202,214 462,390 1,977,429 January 2, 2002 4,802,928 924,780 10,368,798 July 2, 2002 1,202,214 462,390 2,013,610 January 2, 2003 3,600,714 1,225,560 10,351,430 July 2, 2003 2,404,428 924,780 2,042,816 January 2, 2004 3,600,714 1,384,890 10,981,357 July 2, 2004 2,404,428 924,780 2,067,365 January 2, 2005 3,600,714 4,658,111 8,545,109 July 2, 2005 2,404,428 924,780 2,088,574 January 2, 2006 3,600,714 10,807,954 4,557,132 July 2, 2006 2,404,428 1,061,139 2,107,268 January 2, 2007 3,600,714 11,521,480 5,340,120 July 2, 2007 2,404,428 1,314,296 2,123,996 January 2, 2008 3,600,714 12,161,923 6,353,247 July 2, 2008 2,404,428 1,592,973 2,139,143 January 2, 2009 3,600,714 9,774,504 7,440,749 July 2, 2009 2,404,428 1,896,919 2,152,993 January 2, 2010 3,600,714 4,479,836 8,300,777 July 2, 2010 2,404,428 2,225,904 0 January 2, 2011 9,843,155 5,385,566 0 July 2, 2011 3,716,432 2,579,723 0 January 2, 2012 22,558,848 7,766,713 0 July 2, 2012 4,125,102 2,958,186 0 January 2, 2013 26,190,164 7,473,591 0 July 2, 2013 4,546,731 3,361,120 0 January 2, 2014 27,026,626 10,604,042 0 July 2, 2014 4,980,851 0 0 January 2, 2015 30,758,116 0 0 July 2, 2015 5,427,034 0 0 January 2, 2016 29,278,952 0 0 July 2, 2016 5,884,893 0 0 January 2, 2017 13,015,118 0 0 July 2, 2017 6,354,074 0 0 January 2, 2018 36,892,528 0 0
32 ANNEX A to Note Purchase Agreement ----------------------- DEFINITIONS 33 EXHIBIT A-1 to Note Purchase Agreement ----------------------- FORM OF LEASED AIRCRAFT PARTICIPATION AGREEMENT 34 EXHIBIT A-2 to Note Purchase Agreement ----------------------- FORM OF LEASE 35 EXHIBIT A-3 to Note Purchase Agreement ----------------------- FORM OF LEASED AIRCRAFT INDENTURE 36 EXHIBIT A-4 to Note Purchase Agreement ----------------------- FORM OF AIRCRAFT PURCHASE AGREEMENT ASSIGNMENT 37 EXHIBIT A-5 to Note Purchase Agreement ----------------------- FORM OF LEASED AIRCRAFT TRUST AGREEMENT 38 EXHIBIT B to Note Purchase Agreement ----------------------- FORM OF DELIVERY NOTICE __________ __, 199_ Wilmington Trust Company One Rodney Square 1100 North Market Street Wilmington, Delaware 19890-0001 Attention: Corporate Trust Administration First Security Bank, National Association 79 South Main Street Salt Lake City, Utah 84111 Attention: Corporate Trust Department Moody's Investors Service, Inc. 99 Church Street New York, N.Y. 10007 Attention: Standard & Poor's Ratings Service 26 Broadway, 14th Floor New York, N.Y. 10004 Attention: Fitch IBCA, Inc. 1 State Street Plaza New York, N.Y. 10004 Attention: Re: Atlas Air Gentlemen: Reference is made to the Note Purchase Agreement dated as of February 9, 1998 (the "Note Purchase Agreement") among Atlas Air, Inc. ("Atlas"), Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, as Subordination Agent and as Paying Agent, and First Security Bank, National Association, as Escrow Agent. In accordance with Section 1(b) of the Note Purchase Agreement, the undersigned hereby notifies you as follows: 39 -9- (i) Delivery of an Aircraft, and the consummation of the financing therefor, will take place on ___________, __, 199_, which is a Business Day before the Cut-off Date. (ii) Atlas will treat the Aircraft as a [Leased] [Owned] Aircraft. (iii) [The Owner Participant (a) is not an Affiliate of the Company and (b) based on the representations of the Owner Participant, is a Qualified Owner Participant or is a person the obligations of which under the Owner Participant Agreements are guaranteed by a Qualified Owner Participant].1 (iv) The aggregate principal amount of Series A Equipment Notes to be issued and purchased by the Pass Through Trustee is $[ ]. (v) The aggregate principal amount of Series B Equipment Notes to be issued and purchased by the Pass Through Trustee is $[ ]. (vi) The aggregate amount of Series C Equipment Notes to be issued and purchased by the Pass Though Trustee is $[ ]. The undersigned hereby directs the Pass Through Trustee to (a) instruct the Escrow Agent to provide Notices of Purchase Withdrawal to the Depositary in respect of the Equipment Notes to be issued as specified above and (b) enter into the Participation Agreement included in the Financing Agreements with respect to the Aircraft on the date specified in clause (i) above and to perform its obligations thereunder. ATLAS AIR, INC. By: ----------------------------- Name: Title: - ---------------------------- * Includes for Leased Aircraft only. 40 EXHIBIT C-1 to Note Purchase Agreement ----------------------- FORM OF OWNED AIRCRAFT PARTICIPATION AGREEMENT 41 EXHIBIT C-2 to Note Purchase Agreement ----------------------- FORM OF OWNED AIRCRAFT INDENTURE EX-10.110 24 EMPLOYMENT AGREEMENT 1 EXHIBIT 10.110 EMPLOYMENT AGREEMENT This EMPLOYMENT AGREEMENT, dated as of February 16, 1998 ("Agreement"), is made by and between STEPHEN C. NEVIN ("EMPLOYEE") and ATLAS AIR, INC. ("ATLAS"). WHEREAS, EMPLOYEE warrants that he is entering voluntarily into this Agreement, and that no promises or inducements for this Agreement have been made outside the terms and conditions referred to herein, and EMPLOYEE enters into this Agreement without reliance upon any statement or representation by ATLAS or any other person, concerning any fact material hereto. NOW, THEREFORE, in consideration of the covenants contained herein, EMPLOYEE and ATLAS agree to this Employment Agreement for implementation effective February 16, 1998. 1. Definitions. 1.1 For purposes of this Agreement, "Cause" means (i) any act or acts of material dishonesty by EMPLOYEE; (ii) failure of EMPLOYEE to comply with any of EMPLOYEE'S obligations under this Agreement within ten (10) days of written notice of such notice; or (iii) the conviction of or "no contest" plea by EMPLOYEE to any misdemeanor of moral turpitude or any felony; or (iv) any violation of ATLAS corporate policies as set forth in the Employee Handbook; provided that, if such violation is subject to cure, EMPLOYEE shall have ten (10) days within which to cure such violation. 1.2 "Permanent Disability" as used herein shall be deemed to have been sustained by EMPLOYEE during his employment if he shall have been continuously disabled 1 2 from performing the duties assigned to him a period of six (6) consecutive calendar months, and such Permanent Disability shall be deemed to have commenced on the day following the end of such six consecutive calendar months. 1.3 For purposes of this Agreement, a "Change in Control" shall be deemed to have occurred upon the happening of two of the following: 1.3.1 Michael Chowdry ceasing to have a direct or indirect beneficial ownership (within the meaning of Rule 13(d)(3) promulgated under the Securities and Exchange Act of 1934) of at least 51% of the combined voting power of ATLAS's then outstanding voting securities entitled to vote generally in the election of directors; or 1.3.2 Michael Chowdry ceasing to be, on a substantially full-time basis, the Chief Executive Officer of ATLAS; or 1.3.3 The acquisition by any person, entity or "group," within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (excluding, for this purpose, any employee benefit plan of ATLAS or its subsidiaries which acquires beneficial ownership of voting securities of ATLAS) of beneficial ownership, within the meaning of Rule 13(d)(3) promulgated under the Securities and Exchange Act of 1934, of a percentage of the combined voting power of ATLAS's then outstanding voting securities entitled to vote generally in the election of directors which is greater than the percentage beneficially owned directly or indirectly by Michael Chowdry. 1.4 "Good Reason" shall mean (i) a substantial reduction in EMPLOYEE's title; (ii) a substantial change to EMPLOYEE's duties; (iii) or a reduction in EMPLOYEE's Base Annual Salary below $175,000. 2 3 1.5 "Employment Period" shall mean from February 16, 1998 through February 15, 2001. 1.6 "Confidential or Proprietary" as used herein shall refer to all non-public information relative to ATLAS's structure and practices except: 1.6.1 Information that is or becomes a matter of public knowledge through no fault of EMPLOYEE; or 1.6.2 Information rightfully received by EMPLOYEE from a third party without a duty of confidentiality; or 1.6.3 Information disclosed to EMPLOYEE with ATLAS's prior written approval for public dissemination. 2. Employment and Obligations of Employee. 2.1 Employment. During the Employment Period, ATLAS agrees to employ EMPLOYEE, and EMPLOYEE shall serve, as Vice President and Chief Financial Officer of ATLAS. The scope of EMPLOYEE's responsibilities shall be as determined by the Board of Directors of ATLAS and/or appropriate officers of ATLAS. EMPLOYEE shall not be entitled to any additional compensation for serving in any other office or capacity for ATLAS or any of its subsidiaries. 2.2 Obligations of EMPLOYEE. EMPLOYEE agrees, except when prevented by illness, Permanent Disability or period of vacation, to devote substantially all of his business time and attention to the good-faith performance of the duties contemplated hereunder. 2.3 Principal Residence of EMPLOYEE. EMPLOYEE shall maintain his principal residence in the Denver, Colorado area; provided, however, that EMPLOYEE shall move to a new location upon request by ATLAS and ATLAS shall pay to EMPLOYEE 3 4 reasonable and customary moving expenses (grossed up for federal and state taxes). In the event the new location has a higher cost of living than Denver, ATLAS will compensate EMPLOYEE for the increase in cost of living. 3. Compensation. ATLAS shall pay to EMPLOYEE, during the period of his employment hereunder, as follows: 3.1 Base Salary. ATLAS shall pay to EMPLOYEE, on a semi-monthly basis, a Base Salary of not less than Seven Thousand Two Hundred Ninety-one and 66/100 Dollars ($7,291.66), which equals an approximate annual Base Salary of One Hundred Seventy-five Dollars ($175,000). 3.2 Incentive Bonus Plan. Under ATLAS's Incentive Bonus Plan, EMPLOYEE shall be eligible to receive annually a target bonus in an amount equal to a minimum of fifty percent (50%) of his annual Base Salary. EMPLOYEE shall be eligible to participate in any successor Plan. 3.3 Stock Options. EMPLOYEE shall be entitled to an initial stock option grant of 25,000 shares of ATLAS stock. Commencing on the first anniversary date of this Agreement, and for two (2) years thereafter on said anniversary date, these shares shall vest in the following installments: 8,333 options on February 16,1999; 8,333 options on February 16, 2000; and 8,334 options on February 16, 2001. The option exercise price shall be Twenty-nine and 06/100 Dollars (USD $29.06). All other terms of this grant are contained in the Stock Option Agreement which is incorporated herein and made a part hereof. 3.4 Loan. EMPLOYEE shall receive from ATLAS a loan in the amount of One Hundred Forty-six Thousand Five Hundred Three Dollars (USD $146,503) for a period of two (2) years, with principal and accrued interest due at maturity (February 16, 2000). Interest 4 5 shall be at the lowest fixed rate allowable without penalty under IRS guidelines (5.54% per annum). 3.5 Profit Sharing. Beginning at the end of EMPLOYEE's thirteenth (13th) month of employment hereunder (March 31, 1999), EMPLOYEE shall be entitled to participate in ATLAS's profit sharing plan which guarantees EMPLOYEE a minimum of ten percent (10%) of his annual Base Salary in profit sharing benefits through 1999, plus entitles EMPLOYEE to receive any profit sharing payments which exceed the minimum 10% guarantee. 3.6 401K Plan. On the first day of the month following ninety (90) days of employment hereunder (June 1, 1998), EMPLOYEE shall become eligible to participate in ATLAS's 401K Plan which provides for a fifty percent (50%) match by ATLAS of EMPLOYEE's contribution, up to a maximum contribution of ten percent (10%) of EMPLOYEE's annual Base Salary (as it may be adjusted), plus profit sharing. 3.7 Stock Purchase Plan. On the first day of the month following one (1) full year of service, EMPLOYEE will be eligible to participate in ATLAS's Stock Purchase Plan whereby EMPLOYEE may purchase ATLAS stock at a fifteen percent (15%) discount, up to an aggregate of 15% of EMPLOYEE's annual Base Salary. 3.8 Health Care. On the first day of the month following ninety (90) days of employment hereunder, EMPLOYEE shall be eligible for benefits provided under ATLAS's "cafeteria plan," as described in the materials received by EMPLOYEE with the January 30, 1998 offer of employment letter signed by Richard H. Shuyler on behalf of ATLAS, and agreed to by EMPLOYEE (evidenced by EMPLOYEE's signature of approval dated February 2, 1998). ATLAS shall reimburse EMPLOYEE for costs incurred by him under the Consolidated Omnibus Budget Reconciliation Act ("COBRA") from his date of employment to his eligibility date. 5 6 ATLAS reserves the right to discontinue participation in any health insurance plan at any time, with the understanding that ATLAS will comply in full measure with all state and federal laws regarding the changes of insurance coverage by private employers and notification under COBRA. 3.9 Bonus. ATLAS shall extend to EMPLOYEE a cash bonus in the total amount of Fifty Thousand Dollars (USD $50,000). 3.10 Relocation Expenses. EMPLOYEE shall receive on or about February 16, 1998, a lump-sum relocation allowance of Thirty Thousand Dollars ($30,000). This amount will be "grossed up" to cover federal and state taxes. In addition, ATLAS shall reimburse to EMPLOYEE all real estate commissions and closing costs incurred in both the sale of the Marietta, Georgia property and purchase of the Denver, Colorado area property. The total amount of those expenses will be "grossed up" to cover federal and state taxes. 3.11 Corporate Automobile. EMPLOYEE will be entitled to professional and personal use of a company vehicle at a price not to exceed $40,000.00. The decision to lease or purchase is at the discretion of ATLAS. Title to the automobile shall be in the name of ATLAS. ATLAS will be responsible for all insurance premium payments related to the vehicle and all other vehicle related expenses, except that EMPLOYEE will pay the costs of fuel. 4. Termination of Employment Period. The Employment Period contemplated hereunder shall terminate under the following conditions: 4.1 At-Will Arrangement. The Employment Period may be terminated hereunder at any time, for any reason, by either ATLAS or EMPLOYEE upon written notice of the terminating party to the other. ATLAS and EMPLOYEE each expressly understand and agree that the employment relationship defined hereunder is "at-will." 6 7 4.2 Upon EMPLOYEE's death or Permanent Disability, the Employment Period contemplated hereunder shall terminate, and EMPLOYEE's unpaid annual Base Salary and profit sharing amounts shall be paid to EMPLOYEE or his personal representative as of that date, but no other benefits or remuneration hereunder. 4.3 If the Employment Period contemplated hereunder is terminated by ATLAS other than for Cause or by EMPLOYEE for Good Reason, and subject to execution of a Release upon terms acceptable to ATLAS, EMPLOYEE shall receive any unpaid annual Base Salary or profit sharing amounts then due under Section 3.1 hereof, plus One Hundred Seventy-five Thousand Dollars (USD $175,000). 4.4 Non-Competition Provision. EMPLOYEE covenants and agrees that he will not, at any time before five (5) years after his termination of employment with ATLAS, reveal, divulge or make known to any third party any confidential or proprietary records, data, trade secrets, pricing policies, strategy, rate structure, personnel policy, management methods, financial reports, methods or practice of obtaining or doing business, or any other Confidential or Proprietary information of ATLAS or any of its affiliates which is not in the public domain, except as required by law. EMPLOYEE further agrees that at no time before two (2) years after his termination of employment with ATLAS will he engage in any of the following activities directly or indirectly, for any reason, whether for his own account or for the account of any other person, firm, corporation or other organization: 4.4.1 Solicit, employ, or otherwise interfere with any of ATLAS's contracts or relationships with any client, employee, officer, director or any independent contractor, whether the person is employed by or associated with ATLAS on the date of this Agreement or at any time thereafter. 7 8 4.4.2 Solicit, accept, or otherwise interfere with any of ATLAS's contracts or relationships with any independent contractor, customer, client or supplier, or any person who is a bonafide prospective independent contractor, customer, client or supplier of ATLAS. 4.4.3 EMPLOYEE agrees that he will neither accept employment with or give advice to any air cargo carrier or an air cargo division or affiliate of any other airline for a period of two (2) years after termination of employment. 4.4.4 The parties agree and intend that breach of this non-competition clause shall subject EMPLOYEE to the full measure of contract and equitable damages. 5. Choice of Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Colorado, without reference to principles of conflict of laws, and any litigation relating to the Agreement shall be tried in Colorado courts (state, local and federal, as applicable). 6. Severability and Enforceability. It is expressly acknowledged and agreed that the covenants and provisions hereof are severable; that the enforceability of one covenant or provision shall in no event affect the full enforceability of any other covenant or provision herein. Further, it is agreed that in the event any covenant or provision of this Agreement is found by any court of competent jurisdiction to be unenforceable, illegal or invalid, such invalidity, illegality or unenforceability shall not affect any other term or condition contained herein. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or unenforceability of any other provision of this Agreement. 8 9 7. Miscellaneous. 7.1 EMPLOYEE understands and agrees that all ATLAS fringe benefit plans (e.g., Profit Sharing, 401K, health care, etc.) are subject to amendment, revision, and/or termination from time to time at ATLAS's sole discretion, and that any such action will be binding upon EMPLOYEE. 7.2 Proration. In the event EMPLOYEE is terminated in the middle of any calendar month, the Base Salary due EMPLOYEE for such month shall be prorated on a daily basis. 7.3 No Waiver Except in Writing. No waiver or modification of this Agreement or any of the terms and conditions set forth herein shall be effective unless submitted in writing, duly executed by the parties. 7.4 Successors and Assignees. This Agreement shall be binding on ATLAS and any successor thereto, whether by reason of merger, consolidation or otherwise. The duties and obligations of EMPLOYEE may not be assigned by EMPLOYEE. 7.5 Confidentiality of Terms. ATLAS and EMPLOYEE agree that the terms and conditions of this Agreement are confidential and that neither party shall disclose the terms of this Agreement to any third parties, other than EMPLOYEE's spouse, the parties' attorneys, auditors, or accountants, or as may be required by law or necessity to enforce this Agreement. 7.6 Full Understanding. EMPLOYEE declares and represents that he has carefully read and fully understands the terms of this Agreement; has had the opportunity to obtain advice and assistance of counsel with respect thereto, and knowingly and of his own free will, without any duress, being fully informed and after due deliberation, voluntarily accepts the terms of this Agreement. 9 10 7.7 Entire Agreement. This Agreement sets forth the entire agreement and understanding between the parties with respect to the subject matter hereof and supersedes all prior agreements, arrangements and understandings between the parties with respect to the subject matter hereof. IN WITNESS WHEREOF, the parties have executed this Agreement the date and year first above written. ATLAS AIR, INC. By: /s/ RICHARD H. SHUYLER Name: Richard H. Shuyler Title: Executive Vice President - Strategic Planning EMPLOYEE: By: /s/ STEPHEN C. NEVIN Name: Stephen C. Nevin Title: Vice President and Chief Financial Officer 10 EX-21.1 25 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21.1 SUBSIDIARIES OF THE REGISTRANT Atlas One, Inc. Atlas Air Services Limited LHC Properties, Inc. Atlas Freighter Leasing, Inc. Atlas Freighter Leasing II, Inc. Atlas Flightlease, Inc. Genesee Insurance Company, Ltd. EX-27 26 FINANCIAL DATA SCHEDULE
5 1,000 12-MOS DEC-31-1997 DEC-31-1997 41,334 111,635 55,702 9,275 0 208,671 1,063,210 98,959 1,297,415 128,308 736,026 0 0 225 238,604 1,297,415 401,041 401,041 0 345,039 0 0 45,469 10,533 3,844 6,689 0 16,740 0 23,429 1.04 1.04
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